Latest / Money Grows on Trees / #296 - Why The Australian Property Market MUST Crash

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#296 - Why The Australian Property Market MUST Crash · Money Grows on Trees

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  I'm about to tell you something that will make property owners very
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  angry. The Australian housing market must crash.
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  Not because I want it to, but because it's the only way to save our economy
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  from something far worse. Right now, Australian property is
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  valued at $11.6 trillion. That's
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  more than six times our entire GDP, and it's underpinned by
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  $2.6 trillion in debt. That
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  is debt that's eating up 45% of household income. Even
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  after rate cuts, it's not sustainable. This is
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  a ticking time bomb. And APRA, the banking regulator, can
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  see it. They're trying to defuse the bomb before it explodes and takes the
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  entire financial system with it. So yes, they're planning
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  to crash the market, but not to hurt you, to save you from
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  something far worse, a chaotic, uncontrolled collapse that
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  would make the GFC look like a warmup. So in this video, I'm
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  going to show you why the crash is necessary, and what you
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  need to do right now to protect your wealth and position yourself for the
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  opportunities that will come after. I'm Lloyd James Ross, seven
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  figure investor and entrepreneur and I've helped thousands of business owners and
• 1:06
  professionals turn financial stress into success. If
• 1:09
  you're stuck in old money habits, overwhelmed by investing or unsure where
• 1:13
  to start, This is for you. I'll give you the mindset and
• 1:16
  strategies to take control, grow your wealth and achieve financial
• 1:20
  freedom. It's time to make your money work for you. First,
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  let's see where the problems lie. Let's see what the problems APRA
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  is trying to solve and their government built problems.
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  The first one is the 5% deposit scheme. So
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  this allows those eligible up to a certain price
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  point, about 1.2 million, to purchase with as little as 5% deposit
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  and avoid mortgage insurance. So this
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  has created a buying frenzy and pumped prices up
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  even further from where they are. Now this is a problem because those
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  coming into the market at these prices with all that debt with
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  certainly the lowest incomes on the entire spectrum for
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  those who are buying real estate and these are the people that get
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  hit first and hit the hardest and You're going to see a lot
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  of foreclosures at this level, right? Because they're basically borrowing almost
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  all the money. Now, we all know from the GFC that didn't end
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  well, and it won't end well here, okay? So what's happened
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  is the government has explicitly promoted helping
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  people to buy sooner, but purchase more expensive property
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  up to over a million dollars with just 5% deposit, right? That's
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  the promotion. And the challenge with this is
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  prices have never been this high. So it might seem like
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  they're trying to help, but all they're doing is locking people into financially
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  insecure positions. And of course, it's going to pump up price, already
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  pumped up prices. And they're really probably the last people
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  buying in this marketplace right now. And they're desperate. They're
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  desperate to get on the ladder because they mistakenly think
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  that property can only go up, and that's not a good place to be,
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  right? That's the first thing that's happening. Whilst they're doing this, the second
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  thing they're doing to pump up prices is they're keeping
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  immigration high, right? And the ABS data shows that overseas
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  migration was like I don't know, it's around half a million people
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  every single year. It's like the size of Canberra every single year.
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  And you don't have to be a genius to work out there's too many people here, based
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  on the current infrastructure constraints, because traffic is
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  higher, things are more expensive, inflation is up.
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  Housing is up. You know, like I saw a picture in
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  Sydney the other day, it just looked like little India trying to get on the flippin' train, right?
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  Just because there's so many people. And our infrastructure can't deal
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  with it. We have to just temper it a little bit until we catch up. I'm
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  not suggesting we don't need to immigrate people to grow this country, because our birth rate's 1.3. So
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  we do, but we don't have to do it in such an unsustainable way. We
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  don't have to hurt the current citizens to build the
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  country. We just don't have to do that, right? What's
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  happening when they're bringing in more people plus the adding the 5% deposit
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  is it's it's pumping the real estate market
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  up even more. Yes. And so immigration is
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  a real issue. And politically, it doesn't look like it's going to change for another couple
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  of years. There are people suggesting
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  that the Labor government is importing voters. Now, when you bring in new people,
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  you do have to wait for them to become citizens until they are allowed to vote,
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  but this has been happening for quite some time, so I dare say citizenship's now been
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  handed out, those people will be able to vote, yes?
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  And so the only party that's standing up against this unsustainable migration
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  is the One Nation Party, and I think the Australian population I
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  mean, outside people who are in the property sector and developers and lobbyists in
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  those areas that do well with higher immigration, they're going to be lobbying hard
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  to keep it happening. They will. And certainly those who have to employ
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  a lot of lower priced labour, they're going to do it too. So
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  I would say a lot of the mining magnates and real estate moguls are
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  going to be lobbying hard in Canberra to make sure that this unsustainable
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  migration continues. the people
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  have the power and they have the voice. So we'll see in the next federal election in two years as
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  to what happens there, but this is a government-built problem.
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  So the government built the 5% deposit scheme recently, that's a government-created problem,
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  and the immigration is a government-created problem. All right, now I've spoken about it on
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  episodes in our podcast before, but this is what's setting up
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  for the saving grace of what I'll explain in a second. The third thing
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  that's propping up prices, and I have mentioned this so many times, and
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  finally, It's coming home to roost. And
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  if you go back and watch my episodes enough, you'll see that I've said we shouldn't be
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  reducing interest rates. We shouldn't be reducing because it's going to exacerbate inflation. And
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  so sure enough, if you pull in a 5% deposit scheme,
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  you pump up prices, then you bring in more people than we need,
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  you pump up prices of goods and services because there's high demand. So what do you
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  think is going to happen if we keep rates low? Or if we drop them, which we did, like idiots?
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  Of course, inflation is going to rise. And guess what happened? It
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  went up to 3.8%. recently. It's now rising. Now
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  rate cuts are off the table and it's going to be rate rises, which
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  was predicted, because you can't do all those things and expect inflation to
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  fall. It's just ridiculous. I don't know what school, what
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  economic school they went to at the RBA, but they're a bunch of dumb shits basically,
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  as if you couldn't see that was going to happen. Like, it
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  was obvious. So what they should have done is just kept rates at
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  4%, let the market build around the rates. Again, I'm not an IBA, so, you
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  know, walk a thousand miles in a man's shoes before you judge him. But if
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  you go back and listen to my episodes, it was pretty obvious we shouldn't be dropping rates, but
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  that's what they did. Just quickly, if you're ready to take control of your finances, but
• 6:34
  feel stuck on where to start, I have a solution. My
• 6:38
  book, Money Bias Happiness, simplifies investing and
• 6:41
  wealth building with practical steps to help you achieve financial peace.
• 6:45
  Get your copy via the link in the show notes and let's get your money working for
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  you. Now back to the episode. So if you add those three things
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  together, 5% deposit, high immigration levels,
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  way above the norm of what's sustainable, which would be more like 130,000, and you add in the
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  lower interest rates, you're gonna see massive pump up in the
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  housing market, which is what's happened. And now, we've
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  got a situation where if we don't change this, we're
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  gonna career into a huge fall. If you look at
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  countries like New Zealand and Canada, who are very similar politically
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  to us, very similar, I mean, New Zealand's our neighbor, they're
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  going through huge corrections. In fact, in Canada, I believe the
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  market's down almost 30% now. Now if you
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  think about it those who got a 5% deposit in and they bought for
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  a million What would happen if they went into negative equity and they're upside down
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  in their mortgage? They wouldn't be able to sell even and their mortgage would follow
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  them in Australia. We don't have non-recourse loans We have full recourse loans.
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  That means if you can't pay back your mortgage and you can't sell your house, you'll go broke You'll
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  go bankrupt. You can't repay your mortgage. You're in trouble. And
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  if there's no mortgage insurance, haha on those, which is part of
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  the policy and the promotion, then the banks are going to take
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  the brunt of that too. And we're going to see a shift in the bank's earnings reports.
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  We're going to probably see a fallout in the banking industry. So this is what's
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  going to happen if we continue where we're going to go, right? And by all
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  accounts, as I said, it looks like the federal government
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  doesn't give a shit about where we're going. They
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  just don't care. Claire O'Neill, who's the housing minister,
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  she puts ridiculous gaslighting posts on X.
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  Albanese doesn't give two hoots, he doesn't even, I don't even know if he knows what day
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  of the week it is. Government is a big part of the problem. And again,
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  I've mentioned this and I'll be staunch with this, the One Nation
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  Party, and it's become political. The fact that housing has to become political
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  is ridiculous. But we've turned housing into an investment vehicle.
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  And that's why it's being pumped up. And it's the political policies
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  in place from the current government that's causing the problems. And
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  Pauline is the only one coming out and saying, hey, this is not good for Aussies, which
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  is why I think she's going to clean up the next federal election. So that
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  being said, where are the responsible adults? Is
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  there any government department that's doing the right thing, equalize the
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  market a little bit so we can prevent a huge collapse and
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  crash, which would be catastrophic? And thankfully, there
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  is. APRA, who's the banking regulator, just recently
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  they've announced they're going to cap high debt to income loans, which is wonderful.
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  So how many people qualify for loans is probably going to fall, which
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  is what we need. Because the last thing we really need, if you've ever watched the
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  big short, the movie, is these things called ninja loans, where they're just
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  giving money to people with no income, no jobs called ninjas. Now in
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  Australia, we don't have that level of irresponsibility, because
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  we have APRA in place, right? They're the banking regulator. And they don't want the
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  Australian banking system to fall like what happened in the States. So
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  they've come out and put in place some preemptive policy
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  to minimise the vulnerabilities. That's what they've done, okay? So
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  they've made sure that you have to have a certain amount of income to service the
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  loan, not everyone can qualify, and they're putting other things in place
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  to make sure that We're more or
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  less just not giving loans to people that can't afford them, yes? So it's
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  actually putting anti-demand policies
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  into place, which is what property
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  investors would hate. The reality is that those who
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  own houses are incentivized to prop up the prices, fact.
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  As soon as you own an asset, of course you want it to
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  go up. Why would you want it to go down? You wouldn't. But this is
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  the challenge we face when we turn a human
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  need out of the three real core human needs as water,
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  food, and shelter. And incidentally, I worked out,
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  well, I didn't work it out, I actually saw someone who's smarter than me say this, so
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  I'm just gonna take it from them, is if you had all three,
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  which one would you want first? And most people would say water. Now, what's interesting about
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  that is if you, If you went without water
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  for three days, you can still live, yeah? Food is like two
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  to three weeks, maybe longer. But they
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  said that if you don't have shelter and you're open to
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  the elements, you can die the fastest because of
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  hypothermia, right? Depending on the season and so forth. So
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  the shelter is actually the most important human need. And
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  we've turned it into an investment vehicle. And not just that, we've turned it
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  into religion, we've turned it into a speculative bubble
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  asset, and that's not conducive to
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  a good working society. This is not. And
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  so APRA seems to be the only ones. that care
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  about that. And if we don't solve the problem, then it's just
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  going to get worse. Because if property prices fall drastically, like by 30, 40, 50%, which
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  can happen, and stay there for a long period of time, you're going
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  to see a huge fallout across jobs, you're going
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  to see a huge anti-wealth effect, spending is going to
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  fall, there's going to be tightening credit, and you're going to see
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  unemployment go up, and you're going to see negative equity, you're going to see a lot of houses being sold. Now,
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  if you're a property owner, you don't want that. What
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  you would want is an adult in the room to say, hey, hey, hey, let's
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  not crash the market drastically by letting it go unchecked. Let's
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  just put things in place to temper it. Let's put
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  things in place where prices don't go up 12% a year. What if they just went sideways
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  for a while? What if we just let things catch up a little bit? As
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  a property owner, you'd want that, but no, no, no. Greed, the
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  sin of greed takes over. No, I want my property to double in the next five
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  years. So I can understand that's the incentive that's
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  really causing a lot of housing to be bought. But the fact of the matter is
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  you don't want this to go unchecked as a property owner. You
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  might get annoyed if they start putting things in place like this, because all
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  of a sudden, because you bought, you think it's going to go up. But the reality is it needs
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  to come down. It needs to come down for you, it needs to at least go sideways
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  for all for you, and it needs to go sideways and down a little bit for those that don't
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  own, who are renting. Because it would be a win-win outcome if it actually
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  went sideways or down a little bit for a while. It would be win-win-win. Because
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  the owners wouldn't have a huge collapse laid up and have to get in a negative equity
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  and sell for a loss and clean themselves up. And renters
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  and those wanting to enter the market will have a more reasonable price to come in.
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  So however you look at it, APRA seems to be the only one who
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  has got a sensible approach to what we should be doing in the Australian real estate market. And
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  it seems to me like the current Labor government has no idea what's going on, or
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  they're actually exacerbating it, and the One Nation Party seems to
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  be the only one coming against it. I mean, I think the Liberal Party will disappear in the next five years.
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  I don't think they know what the hell is going on either. So I can't
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  believe that real estate has become political, but it has. So I hope that makes sense. That's
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  what I feel is going to happen. APRA is on purpose correcting
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  the market by these policies and thankfully they're doing it because we
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  cannot go unchecked any longer because the fallout will
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  be absolutely catastrophic and we want to avoid that. So I hope you've enjoyed the
• 13:44
  episode. I hope it makes sense. Share this with a friend. Leave me a comment on what
• 13:47
  you think about the Australian housing sector. Is it overvalued, undervalued,
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  fairly valued? Do you want it to go up, down or sideways? You tell
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  me. Are you an owner? Are you a renter? I'd love to know the comments. I come back
• 13:58
  and reply to all the comments myself. So please leave a comment. What
• 14:01
  do you think about APRA's latest policy implementation? Are
• 14:05
  you a supporter? Are you against it? What do you really want to happen in
• 14:08
  the market? Let me know. See you in the next episode. Thanks for listening to Money
• 14:11
  Grows on Trees. If you enjoyed the episode, leave a five-star review on
• 14:15
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• 14:21
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• 14:25
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