Here comes the meltdown…again…no seriously….

Watching 60 minutes last night I saw their spot on the imminent housing crisis crash that was coming our way  circa 30% fall). The key indicator for this pending bust was the huge retraction in prices of homes in Moranbah, Queensland, which is where exactly?

Oh, it’s a coal mining town in Queensland that ramped up to service a huge mining boom that appears to have quietened down a bit recently. So that affects your Pascoe vale or Footscray home how? (Victorian reference, sorry people). Have the people in these areas had changes in employment, income, serviceability, or anything else that might affect their ability to repay the loan they took out?

Sure, we are all connected, and the mining decline has cause issues with the stock market and caused a small rise in unemployment, which in turn has brought about serviceability issues for some, but the same brush can not be used to tar the entire country based on a single suburb.

Fact is people bought in to Moranbah based on the fact it returned positive cashflow on their investment. This was driven by the need to supply housing for workers at the mine. Workers that are no longer there. Supply and demand dictates that if nobody is there to actually rent the place then you can’t rent it. That tends to play havoc with its value I would suggest.

A lot of the time wealth creation is about taking a risk, and people chasing positive cashflow properties based on world cyclical economic demand certainly take that risk. Unfortunately the fact they are a little under educated when it comes to the downside of that risk means that for some it’s going to hurt. I’m not saying don’t take the punt, I’m just saying understand there is risk involved and what that risk is actually anchored to, AND don’t blame the banks for giving you the cash in the first place! You did ask for it. In an economic cycle, nothing lasts forever. Not even strong property growth. But lack of growth does NOT mean retraction of price.

So 60 minutes, nice work on the doom and gloom prediction, keep it up and eventually enough people will believe you and the house pricing WILL stall based on the sheep mentality. For my mind though, I wouldn’t be staking my reputation on shifts to an entire market based on a little town in Queensland, but that’s just me.