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Top overseas commentators highlight NZ's overblown house prices

Posted in News

Two top financial analysts in Australia and America have highlighted New Zealand's overblown house prices and high foreign debts in detailed criticisms of the structural imbalances in both Australia and New Zealand. One described New Zealand as "Australia's Eastern Europe", while the other pointed out New Zealand house prices rose almost twice as fast as American house prices during the boom, but have yet to bust. Sydney-based financial analyst and former hedge fund manager John Hempton has become something of a financial commentating megastar according to the Sydney Morning Herald here and his Bronte Capital blog is regularly linked to by FTAlphaville in its closely watched 'Further Reading' section. In this piece titled Australia - The lucky but unbalanced country, Hempton argued that Australia has problems (particularly inner Sydney's widly expensive housing), but New Zealand's are far worse. Here's his views below.

Australia is one of the smallest and most indebted nations to be given the privilege of borrowing in their own currency and floating that currency. New Zealand (across the ditch) is the smallest country with the unlikely trifecta (has run large current account deficits for a very long time, borrows in its own currency, floats that currency).

I don't like unbalanced economies. The global problems we are now having is because the economy globally had been so unbalanced for a decade before that. However we are and remain unbalanced within Australia. However a relatively mobile labour market (compared to Europe but not to the US), increasing internal migration and a common currency and language should fix that over time.
Australia "“ I like it. I do not like the price. As an investment we are far more likely to be short Sydney consumption "“ and short Australian stocks "“ but it is not a bet against Australia "“ it's a bet against the unbalanced bits of Sydney. And none of that should be unmanageable.
As for Australian banks other than our insane housing market the biggest problems are on the other side of the ditch. New Zealand is Australia's Eastern Europe - the over-indebted place without the historical advantages and with which we are not quite politically and economically integrated. When it comes to the crunch Australia will not guarantee New Zealand's debts - but the Australian banks will - which as Europeans are discovering comes down to the same thing.
I have worked for both Australian and New Zealand Treasuries. I have very strong views "“ perhaps a little jaundiced by personal experience "“ about which is run better. The voting system in New Zealand is insane "“ whereas Australia's parliamentary democracy is amongst the finest in the world. The Treasury has an easier time in Australia and is far more talented. For macroeconomic management this matters. But not as much as the resources that Australia has and New Zealand does not.

Meanwhile banking analyst Ben Claremon at US hedge fund Right Wall Capital has written a detailed report on the vulnerability of Australian banks to the Australian and New Zealand housing markets. He gives a precis of the report on his blog here and I've embedded it below for those who want to read the whole thing. He points out that US house prices rose 68.6% from 2002 to their peak in 2006 and have fallen 32% from that peak. Meanwhile Australian house prices rose 76.3% from 2002 to their peak and have fallen just 6.7%, while New Zealand house prices rose the most at 118.4% and have fallen just 7.8%. Here's his views.

However, as shown by the peak to decline data, the global recession and worldwide real estate bubble has not had anywhere near the impact on housing prices in these two countries as they have had on US prices. The inevitable question that results from this observation has to do with whether or not New Zealand (hereinafter NZ) and Australia (hereinafter AU) are in for a similar decline in prices but are just a few years behind the US in the process. If that is the case then the resulting shock to the local banks that serve this region could be just as dramatic as the impact that the ongoing housing price spiral has had on the US banking system.

Australia-New Zealand Banks

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Not a surprise to me.

Not a surprise to me. Every sign is pointing to prices falling either steeply for two more years or slowly for two decades but either way the stuff priced at $600ooo now will in the end be $400ooo. When the dust has settled you will see where Mr Market has stomped all over the insane property sector.

New Zealand house prices will

New Zealand house prices will fall. There is an old adage that says when America gets a cold New Zealand gets the flu. I see no reason for it to be different this time. I am so surprised that house prices have not already corrected more than they have. Given the huge run up in prices, the relatively lower wages and New Zealanders proven track record for enthusiastic speculation in any given bubble. I'm very convinced that we will see the inevitable correction occur. It won't be nice.

As for why the collapse hasn't happened already I can only think that its a combination of our social security safety net (a very good thing in my view) and possibly optimistic reporting of data.

"I see no reason for

"I see no reason for it to be different this time." Simon old bean, considering that the US has a full blown case of economic ebola and not just a 'cold'. I would suggest NZ is in for cremation.

But but but......... Tony Alexander

But but but......... Tony Alexander has promised us today that it will be ok, be happy.

"Housing cycle has now been and gone. Over the next 2 to 5 years our housing market commentary is going to be along the lines of how wonderful it is that New Zealand escaped the price crashes overseas".

Oh hang on......... Hempton says above, "As for Australian banks other than our insane housing market the biggest problems are on the other side of the ditch". And Straight-Talking Tony works for an Aussie bank......

Maybe a connection there??? Surely not!!

To many people like to

To many people like to make money - Real Estate grew to a major NZ industry - next to just 2 or 3 others = an unhealthy balance, which doesn't create real wealth for our country.

Great - nice words !

"If that is the case

"If that is the case then the resulting shock to the local banks that serve this region could be just as dramatic as the impact that the ongoing housing price spiral has had on the US banking system."

If you try saying this in NZ or AU, you get laughed out of the room.

I wonder if someone can

I wonder if someone can research how many properties Mr TA has... that can be the only reason he constantly talks up the housing market, even when its in dire straits...

Just as well they skipped

Just as well they skipped the rural market.

T.A and A H must

T.A and A H must live next door to each other,and spend the avos scheming over the fence!!!!!:)

The critical stat here is

The critical stat here is the value of housing relative to incomes. The long term average median house value has been @ around 3.5 x incomes as I understand even with the drop in values the current median price is still at least 5.5x this would suggest the average house is more $100k overvalued. These long term trends alway fall back into line. Pain for the banks you bet.

I suppose the Q is,

I suppose the Q is, how or why is the NZ housing market able to cope with / maintain such over-inflated prices? The estate agents seem to think all is well....but you know I rate them considerably worse than second hand car salesmen...Speaking of which car yards are being decimated....So in contrast the NZ housing market holding up this well beggars belief. I pity someone taking the risk of buying today....if it does indeed fall back to median then they are into one huge loss...which could take them a decade to get out of. I almost think a sensible person who doesnt mind a gamble should sell now, take a 6% loss and back in after a 30% correction......

That's the problem in a

That's the problem in a nutshell, Steven. No one wants to take that 6% loss, just in case this IS the bottom.

DC, would residential hit our

DC, would residential hit our banks that hard? in the US a home owner can hand in the keys and walk, the bank cops it directly.....cant do that here, ppl tend to stick and see it through....You would have to leave NZ to dodge the bank, and Im not even sure that's possible....

Colin: yes that seems a great statistic....we seem so over-priced, Id like to see some reasons on why its holding up....

Janet: fundimentally we are over-priced...I

Janet: fundimentally we are over-priced...I assume that, because many NZers have not really been hit yet by this recession that they are thinking its OK to just carry on.

We have not suffered the job losses like the USA which not only are far worse at 10% and climbing, but lack the social safety net....I know some of the people around my area and they are un-easy about their job security or have indeed lost jobs (these are middle income earners)....if that % of a % is multiplied into the population (and holds true) then thats a big group of ppl just holding their breadth...if unemployment rises to 10%? above the present 8%(?)....will that trigger things....

On the other hand the US figure of 10% is the offical figure (ppl activley looking) , some suggest it could be between 14 and 24% (Michigan) of the really un-employed (the rest have given up, so dont count)....which looks twice ours, maybe 3 maybe thats what is holding us up so far and might not cause a collapse....we really have not plunged deeply enough or fast enough not enough ppl are that impacted or frightened yet.

WOW !! Someone finally collated

WOW !! Someone finally collated all the datas that I have been looking high and low for all this time.

Assuming his analysis is right then:

!.The Aussies think China is going to save them via their Iron and Coal play...sorry that's going to be a lot of tears soon. China now knows they have the big stick and is no longer going to play nice...not after the Rio tinto insult.

2.Sooner or later unemployment growth is going to raise default rates on the mortgages....even if ther is no oversupply, higher value debtors will move to lower value dwellings as they liquidate their debts to manageable levels, and lower value to even lower levels to the liquidated levels.....until they reach the homeless level.

3. NZ and OZ is both 60+% consumption compare to 70% in the US, how much will that help? I don't think much.

4. Our exports is now in the hands if Mrs Watanabe in Tokyo with her Yen carry trade, think Mrs Watanabe can wait for her money till kingdom come ??

Claremon does not like to call us Iceland of South Pacific... I think he's just being polite.

Steven, You're right and that's


You're right and that's the distinction most often trumpeted. But just because the bank can pursue you, doesn't mean you can actually pay them. They can't pursue you beyond bankruptcy. The question is will homeowners stuck in negative equity want to sit there and grind it out - and for how long, especially if they lose their job. At present many homeowners are blissfully unaware that they are underwater.

It's not necessarily the case that a US style banking crisis looms, but the complacency and virtual back slapping that has gone on here and in Australia especially over the last couple of years seems a bit premature.

And further to Stevens

And further to Stevens NZ one cant just drop the house keys on the bank managers desk and walk away scott free, as in the States..
So when the proverbial hits the fan, banks dont have whole suburbs of worthless, MT houses and no buyers.

I wonder if there are

I wonder if there are a few other issues:
- given our stupid 84-87 sharemarket gambling, we would have come off a very low hosuing base in 2002? and because of adverse view of sharemarket risks, and tax structure many piled into property - along with net inflow migration.....
I also wonder about other issues holding up values - firstly very high % of "safe" government employees (just a little tinkering with numbers so far) - and also the impact of our stupid student loan scheme - how much does that support property rentals? again on the govt never,never borrowing......
And of course our RMA underpines property values, with inflated construction costs....
don't know where it goes from here - but some of the above are pretty structural

Steven "in the US a


"in the US a home owner can hand in the keys and walk, the bank cops it directly" no no no no no this is not completely true, the no recourse clause only applies to certain states and then only if the bank wants to (they don't have to go thru the courts) so the first tranche of failures were done this way, as it gets worse banks will go after other assets if they think there is a sniff

You also point out one of the majors diff with the us, unemployment, add in living costs (no one freezes to death in NZ) and we are a small market, so maybe we are overpriced because the non myopic want to live here


It is all about supply

It is all about supply and demand, and there currently isn't the supply, which is causing house prices to remain strong. We are also getting a rise in immigrants from Asia, who can afford the prices and don't have much choice in the housing stock, which is helping to keep them up. Unlike the US, we don't have an oversupply of houses. It is cheaper to buy a nice house in the US in many areas, than it is to buy or build an equivalent one in NZ. As the recession bite, I suspect house prices will continue a gradual decline in price, as more people are forced to sell.

I see the same mass

I see the same mass hysteria on here as I did before 2007, only the other way around... Fact is there are so few properties on the market at the moment that even the relatively small number of people looking to buy are in fierce competition with each other for good properties. This situation is unlikely to completely reverse over the next few months so any further "correction" is still a way off.

Rob, you've hit the nail

Rob, you've hit the nail on the head. Despite the fact that most NZ property is highly over-valued by any conceivable measure, there is limited supply and growing demand. We'll only see further radical drops in price if supply drastically is increased or demand suddenly falls off for a protracted period, or perhaps if both things happen at once. Personally I think that supply should be increased, not sure if that's going to happen anytime soon though.

It's a bit like surviving the end of the world, only to find that there are 5 handsome guys left alive and 1 fat lass. The value of the fat lass is very high to each of the guys because there's no choice. What can you do? If all the guys die (or kill themselves from despair) the value of the fat lass is diminished. Likewise, if suddenly a truck-load of 10 Tui girls arrive on the scene demanding that they be allowed to repopulate the planet, the value of the fat lass is also diminished and the guys now find themselves in high demand.

So there you go. Just a caveat - some of my best friends are fat lasses, but I wouldn't take a mortgage out on any of them.

Jeeez Rob, it's probably cheaper

Jeeez Rob, it's probably cheaper to buy an old stone cottage in the N East part of the States, pull it to bits and ship the lot back along with a few tons of oak, maple, cedar and classic furniture, than it is to have a 3br box built here. Just a wee problem of putting it back together and avoiding the mountain of red tape and taxes.

I read somewhere that NZ

I read somewhere that NZ home owners on average move every 4-5 years - so maybe NZ homeowners collected more capital gains in actual cash transactions (as opposed to just on paper) than homeowners in other markets - and those gains were not taxed (which they are in other markets).

So perhaps on average we generally have more equity in our homes than in many of these other markets (e.g. US and UK) - hence we're holding up better even though the prices are so over-inflated compared to incomes?

these foreign scribes are only

these foreign scribes are only pointing out what we already know - property is still overvalued here
Whether overvalue leads to correction is the million dollar question. Property here seems to be defying logic

You could always look at

You could always look at it from the glass half full aspect. Tourism and immigration will boom, with the thousands of people flocking to NZ to unearth and unravel in great depth, why NZ defied the world trend.
What is it that is special about NZ, good question.
Housing took a breather for a while, dropped 10% then continued on it's merry way upwards.

That article could lead to

That article could lead to some interesting debates:

Anyone considering selling a property

Anyone considering selling a property is being fought over tooth and nail by agents. When an agent does get a listing they are working it for a good price to maximise their commission not just grabbing the first buyer down the track as it can be their only commission for many months.

Housing suppliers were warned by Bernard 30% Hickey and most have decided not to sell.

If he's talking risk, then

If he's talking risk, then you can guess which way interest rates are going to go.

Interesting, but like the article

Interesting, but like the article says, he needs more info on the banks to know that much, and his conclusion is he doesn't know what prices will do.

While we are definitely inflated a bit I still think there are some big factors about the US crash that just really don't apply here.
All those combined differences could just be enough to prevent it happening here and oz.
Like supply/demand, consumer trends, foreclosing laws and the ability of Americans to easily walk away.
Also the lack of anything like normal lending standards that went on in the US.

I think it's a little simplistic also to say we rose by more than the US and because they've gone down 30% from a 68% rise we should go down that or more here.
Look at US house price increases from 1971-1978 they went up over 100% but they still never went into negative territory after that (albeit in a higher inflation environment). So if that theory doesn't even always work in one country I'm not sure you can always apply it to other countries.

It still seems pretty hard to know what will happen, I certainly still wouldn't be wanting to take much risk at the moment though.

yeah I agree with you

yeah I agree with you Phil, hard to really know whats going to happen - prices flatten out then slowly rise, or is this a pause before another fall?
I'm not that convinced that cocky Tony Alexander has accurately picked the bottom of the market, time will tell

The fact that this Australian

The fact that this Australian thinks their system of Govt. is better than ours tells you he wouldn't know his arse from his elbow. Anyone bothering to read the Australian news on a daily basis would know that the four big state govt.'s are bordering on broke with the govt.'s being dictated to by union leaders, that especially in Sydney but also Melbourne their infrastructure is failing hugely, that the pork barrel politics played by, especially this labour Govt. are appalling.
The Labour unions run Australia not the elected Govt.s many of whom are incapable of governing.
Why would anyone listen to his garbage.

It must be comming up 12 months since all this housing gloom was dumped on us and so far and without a doubt for a long time yet housing has proven to be resilient.
Even Hickey has backed of his predictions so catch up dummies.

Mozart, your supply and demand

Mozart, your supply and demand example just highlights to me why supply and demand theory doesn't work.

In todays world your five guys turn gay and don't care when the Tui girl arrives so when the Tui girls turn fifty and want want to have children they turn to artificial insemination.

interesting article, not yet mentioned

interesting article, not yet mentioned on this site

Allen - yet another reason

Allen - yet another reason young kiwis should get out now

Supply and deamand factors only

Supply and deamand factors only work when the demand side has financial backing. Sooner or later the credit card that we use to fund our lifestyle will get pulled away from us by the overseas investors/lenders. 30 years of overspending will get us one way or the other..and that day is coming soon.

As Aaron notes it doesn't matter how many fat lasses are around if you aren't her type - so the final house price will be what we can afford. And at the moment we are still kidding ourselves that they are affordable. Prices will come down again one way or the other. Either now or big time later...

I'd suggest the reason NZ

I'd suggest the reason NZ hasn't seen a us style crash is that we've got a bunch of banks each with over 20% market share. Each bank is large enough to affect the property market themselves, and they know it. avoiding too many mortgage/distressed sales results in a market with little stock and avoids driving down price. mortgage sales are significantly slower here as well and usually take 6+ months. Same story in AU

Yeah Realist, prices are affordable

Yeah Realist, prices are affordable now because people can afford to pay them - their is allot of invested interest in maintaining the value of property mainly by people who own more than one property.

They have a stake in the market and have borrowed even more to buy additional "cheap" houses recently holding the market up, it's likely to be a short term flash in the pan before the prices continue slowly downwards.

rlm I think there might

rlm I think there might be some truth in that, the banks in the US, from what I understand, were pretty brutal with people on foreclosing, especially early on in their crash. Mistakening thinking that they could still get good prices for the houses.
It may well have played a big part in crashing their market so hard, along with adjustable rates etc.
In NZ a mortgagee sale really is the last resort, there has normally been a good crack at all other measures before then.

<i>One described New Zealand as

One described New Zealand as "Australia's Eastern Europe"

Ouch, so very true. In fact, the NZ housing mania often reminds me of those Albanian pyramid schemes in the 90s.

You house peddlers are so

You house peddlers are so caught up in your game you can't see the wood for the trees. Their is only one thing that drives the housing prices of any nation in the world up or down and that is the amount of credit/money in circulation and that is currently wholely and solely at the discretion of the central banking network. They decide when you can have it and when they want it back;

One of the fallacies of modern economics is the idea that a central bank is required in order to keep inflation low and promote economic growth. In reality, it is the central bank's monetary policy that causes inflation and depresses economic growth. Inflation is an increase in the supply of money, which in our day and age is directly caused or initiated by central banks. All other things being equal, inflation results in a rise in prices. A so-called "mild" rate of inflation of 3% per year leads to a 56% rise in prices over a 15-year period. Even a "low" rate of inflation of 2% per year leads to a 35% rise over that same period. How is that conducive to long-term growth?

Iain, I thought inflation was

Iain, I thought inflation was when your money buys less goods at the supermarket as per the consumer price index (CPI).

Aarron - you mean to

Aarron - you mean to say that you beleive that inflation has only been running all this time at the official figure of 3-4% based on the CPI. CPI does not include housing for a start.
Those in the know, know you need only look at the increase of decrease in the M3 money supply to get a gauge on inflation or deflation. This noted by Richard Prebble Pg 96 of his book - I Have Been Thinking -;
I've Been Thinking, by Richard Prebble 1996
page 95;
Countries call in the IMF when they cannot pay their debts. Repudiating debt for a trading nation is not a viable option: other countries refuse to trade with you. The IMF as a condition for providing emergency financial loans requires the recipient government to introduce a very stringent financial reform program. The UK had to do it. New Zealand was much closer than most commentators realised
page 96;
Increases in credit by the Reserve Bank greater than any increase in production in the economy in New Zealand has been very inflationary. When the Reserve Bank increased the M3 by double digit amounts, inflation went to double digits too. I noticed under Muldoon that inflation rose to within one percent of what ever the M3 was the year before.
Therefore I used the M3 figures to accurately predict every year in Parliament what next years inflation would be. Its still there in Hansard.

All of this talk advising the citizenship that we should pay off debt. Currently 97% of our money supply enters circulation as interest bearing credit from foreign lenders. Under the current debt based monetary system if the nation paid of its debt we would all have to go back to barter as we would have no monetary means of exchange.
You see, we rent our money supply and you know what happens to an individual that rents all his working life and spends all their income on drugs, you know they will never be freehold or have economic independence.
Currently 39 billion dollars a year flows out of this country in rent/interest payment on our money supply, thats two times the entire health budget.

Lets get real. The only

Lets get real. The only thing that matters is the price of oil. How did we get to our recession. It wasnt the subprime blowup. It was oil. Interest rates werent that high. However the price of fuel doubled. Which had a shocking effect on everyday costs, and average Joe Blow.
So the question is where is the oil price going to go? We are currently, in the middle of a recession, and on the tip of a world wide depression at $70 per barrel.
If the world economy gets worse, nzs income drops, and we will struggle to pay for our expensive housing. But oil will probably be cheaper.
If the world economy improves, oil will be more expensive, which will make everything that we need to use to live expensive, including food. So do we have room in that scenario for overpriced housing?
I think we voted no 2 years ago when housing prices first started to drop.
Average Joe Blow in nz likes to travel, and has to travel a lot. We do not have public transport. We are an oil based economy. Farming and tourism run on oil.
A telling interview with a ski resort manager in queenstown. What was he doing about global warming and making sure he had snow seeing his field was at a very low altitude.
His answer, no problem, they had snow makers, his concern was getting people to queenstown in the future when fuel becomes more expensive.
Get over it folks, put your money into something productive, something we need when the shit hits the fan. Suddenly owning half a dozen overpriced houses wont look so flash, when people will struggle to cover rent because getting to work is costing $200 a week. And all our overseas competitors will have flushed the bullshit out of their property markets.

New Zealand lacks the oversupply

New Zealand lacks the oversupply of housing evident in the US, so housing prices will remain high for another season. But prices will drop relative to the state of the general economy. Job losses are starting to accelerate, household credit costs are increasing, and more importantly, corporations are going to cut even more activity when the coupons on their bonds have to be paid. Ultimately, the debt spiral will result in a downgrade, which will increase borrowing costs, that will trigger higher taxes, higher inflation - and so on.

Iain's comment about the CPI is relevent. CPI numbers are cooked by constantly altering the basket of goods and services to reflect better statistics. Housing, energy and food costs have inflated the heart out of any real growth in the economy.

25% of our exports are

25% of our exports are dairy, the latest auction a few hours ago dropped another 3%. ( on top of a 12% drop last month, on top of a 50% drop in previous months) Our productive sector is haemorraghing. Spending all our dough borrowing money overseas to fund an expensive house is just stupid. Grow up, find a way to earn money for new zealand and get working.
I am not a dairy farmer.

William - Have a good

William - Have a good look and see who are controling stake holders in most multinational oil corporates, you will find the central bankers. What drives the price of oil beyond supply and demand, the fact that any Tom, Dick or Harry can trade oil futures regardless of if they are even capable of physically taking delivery of any oil.
You are right, oil is a lever to creating inflation or deflation when it suits those who control it. Thus the central bankers control one of the most inflationary commodities on the planet and also issue the created credit that inflation causes a greater need for.
William you sound like a wise man, figure it out.
Have nice day everyone, I'm of out to get back on the hamster wheel.

I think NZ is seen

I think NZ is seen as a colony of the rest of the world and still perceived as hot.
Tourist numbers are down but there are still very wealthy people from India, Indonesia and China who think we are an underpopulated wilderness. The government is seen as a sort of cut out figure at the border keeping out the odd relative with cancer but wide open to anyone acceptable to the business community* .

*was not Nai Yin Xue a business migrant?

If there is anybody we

If there is anybody we should not be listening too it is "Two top financial analysts in Australia and America". These blokes are essentially the "shock jocks" of the financial world. As for all the knee bending to overseas "experts" - give it a rest.

The fact is no one knows how this crisis is going to play out either here or elsewhere.

Ordinary commonsense says limit your exposure to any particular asset class and keep a fair bit of liquidity available.

Hummm. It's easy as an

Hummm. It's easy as an outsider to stand up two graphs (however persuasive) and point to the difference. What would be more powerful is if they talked to the differences between the US/UK and AU/NZ and explained why these would not support the market in the long run. I.E. lack of subprime morgages here, different tax incentives for investors, general over/under supply, net migration etc.

Neil, Add to the list


Add to the list some other points:

1) Houses in the US were never as expensive as NZ (4.5 * median income at peak, compared to 7-8 in NZ)
2) Interest rates are always 1-3% lower in the US
3) US current account deficiit a lot lower than NZ, suggesting they are not funding their houses as much as ours with unsustainable debt
4) recession hit earlier in UK/US so they are futher through their cycle
5) American sub prime worse, but generally our debt is broader and deeper
6) NZ even less atractive to foreign lenders (which NZ is more exposed to in the first place given all except kiwibank are off shore)
7) NZ has appalling savings record therefore no savings to fund massive lending required for current house prices.

and some more. - our

and some more.

- our housing quality is worse
- unemployment is still yet to hit in full (in the US they are already there)
- our economy faces bigger risks as our economy is overconcentrated on agriculture AND debt based consumption
- the "expat/immigrant" premium built into NZ houses by massivie immigration is now reducing due to a) less wealthy immigrants b) reduced wealth of wealthy immigrants via ppty and stock crashes overseas and higher NZ currency c) investors now looking to yield as opposed to "lifestyle".

and the US does have

and the US does have tax incentives for property - the homeowner gets mortgage interest deductions. Arguably this has a greater effect than investor deduction here as MORE property purchases are from home owners

Heh. Agree with William: the

Heh. Agree with William: the export shoe is about to drop, and then look out below.
Gubmint tax receipts fer one, are going to look even sicker. And the other side - entitlements - will rage on and up the exponential curve.

The 'savings rate' and 'consumption rate' talk is just that - no-one really has a good handle on the actual relevance of either measure. Some 'consumption' is actually minor capital goods (tools are an obvious example) even if spent by a household, not a business. 'Savings' also ignores the black/white economy switcheroo which always comes into play in leaner times. Public Stats, as market operators always know, are for political and feel-good purposes, pure and simple. For the Pure and Simple, indeed, yer might say.

But yer havter laugh at the Eastern Europe tag - unitl you read a leetle bit of history and figger out that Germany, back in the day, thought they could reintegrate their own 'Osties' without real economic pain, being as how the Westies were a powerhouse and all that.

They learnt the hard way. As will we. Or our new owners.

So hang off at .7950,

So hang off at .7950, you reckon, Waymad? 1.000 looks a much more appealing rate to me to head off to the sun.