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Michael Yardney Podcast

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Listen and learn from Michael Yardney, Australia’s most trusted property commentator and a group of experts as they discuss Property Investment, Success, Money and Finance to help you multiply your wealth.
While Michael is best known as a property expert, he is also Australia’s leading authority in the psychology of success and wealth creation. You’ll enjoy the way he challenges traditional finance advice with innovative ideas on real estate investing, personal finance and wealth creation. 
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  1. All Episodes
  2. Harry Dent says Australia’s property bubble will burst- is he right? Dr Andrew Wilson bursts Dent’s bubble

Mar 5, 2018

We are heading for the biggest crash in Australian history according to Harry Dent.

Crypto currencies are about to fall, the stock markets will crash and home values in the big cities are about to halve.

Is this really true?

Today, I speak to Harry Dent to find out what he really thinks.

I also speak to Dr. Andrew Wilson, and give you my thoughts on what’s ahead.

Harry Dent Says Australia’s Property Bubble Will Burst:

Here are some of the things Harry Dent said:

  1. What’s ahead is a global crisis of the developed world -leading to a worse depression than the Great Depression of the 1930's.
  2. Bubbles cause an economic reset, but once that’s over the markets can boom again.
  3. The economies of many countries in the world are slowing.
  4. Demographics will tell you when the different generations are going to spend money and when the slow down
  5. China has the worst bubble in the world. They are also Australia’s biggest trading partner.
  6. Australia’s real estate prices are the second highest (compared to income) in the world.
  7. We have created an artificial bubble because so much money has been injected into the system by governments.
  8. Bubbles build predictably, what’s harder to predict is when the bubble is going to burst.
  9. Stock bubbles crash twice as fast as they build.
  10. When bubbles burst they burst by 70, 80, or 90%. Half of this comes in the first 2 ½ months.
  11. Bitcoin has been leading the stock market crash by about two months.
  12. Businesses are better off leasing rather than owning their premises, unless it’s a totally strategic move to own the business.
  13. You should take some equity from your real estate and short the stock market to hedge against downturns.
  14. A typical real estate bubble is six years up and then six years down because people don’t sell immediately when the bubble crashes.
  15. Values aren’t going to crash as hard in Australia as in other countries.
  16. Things that will cause the bubble to burst include when US real estate starts to go down and bitcoin crashes.
  17. The high-end property markets are what seem to be cracking this time around.
  18. The most overpriced markets in the US are San Francisco and Los Angeles.
  19. Once the bubble bursts, Australia is best positioned of all the developed countries to recover because of its proximity toAsia
  20. Harry’s new book has a whole new bubble model that looks at more than demographics.

Michael’s Take on What Is Going On:

  1. Investopedia defines it as:“A run-up in housing prices fuelled by demand, speculation and the belief that recent history is an infallible forecast of the future. Housing bubbles usually start with an increase in demand in the face of limited supply which takes a relatively long period of time to replenish and increase. Speculators enter the market, believing that profits can be made through short-term buying and selling. This further drives demand. At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices - and the bubble bursts.”

    For mine, bubbles are also accompanied by easing of lending criteria so that loans are easily obtained leading to rapid rises in housing credit, with many people who can’t really afford to take on loans speculating and overcommitting themselves.

  2. Do we have some of the features of a bubble at the moment? Yes.
  3. Are we in a bubble? The answer is no. 
  4. Property values are not about to collapse.
  5. Rising house prices on their own do not cause a bubble. The rise has to be followed with an increase in, speculation, borrowing and leveraging. This makes the market fragile and unstable.
  6. If anything, our banking system has become more stable than it has been for decades. With increased regulations by APRA and the RBA
  7. We’re heading into this stage of the property cycle in the best shape that we’ve been in in a long time.
  8. Most Australian economist do not believe that the Australian market is headed for a crash.
  9. For the markets to crash, we need desperate sellers who are willing to give their property away for nothing, with no one there to buy them.
  10. We need one or more of these things to occur for a property crash to happen:
    1. A major depression,
    2. Massive unemployment,
    3. Exceedingly high interest rates, and
    4. Too many properties available.

Dr Andrew Wilson Bursts Dent’s Bubble:

Here's what Andrew had to say:

  1. Housing prices are NOT going to drop 40% in value.
  2. We probably shouldn’t even be responding to these outrageous predictions.
  3. It’s very unlikely that we’ll see any house prices lowering in Melbourne and Sydney this year. Demand remains strong in both of these markets.
  4. New household formation is about 1,500 per week in Sydney.  This translates into the need for  75,000 new dwellings each year.
  5. Also 8% fewer homes were approved for building this year in Sydney.
  6. The key catalyst for the housing market are interest rates. Currently, they are going nowhere.
  7. We have the near lowest income growth that we’ve ever had. Without income growth and low interest rates there is no capacity to push prices higher.
  8. A challenge for policymakers is that  middle and low income workers expenses are rising faster than their incomes.
  9. High debt and low interest rates has constrained property price growth.
  10. It’s been over seven years since Australia has had an increase in interest rates.
  11. Interest rates should remain flat for at least another year.
  12. We have a resilient robust market. The banks are much healthier now than they were two years ago or when we had the GFC.

Links and resources:

Quotes:

“As an investor, I believe it’s important to listen to others rather than to just move forward with confirmation bias.” Michael Yardney

“Debt bubbles cause financial asset bubbles and at some point we have to have a reset.” Harry Dent

“We’re going to see a consolidation of price growth in all of the capital city markets. This is a product of flat interest rates.” Dr. Andrew Wilson

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