Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
Over two thirds of voting households own their own home.
Are you only now realising that governments will try to please the majority of voters?
What do you think would happen to the first government who said they didn't care if house prices crash?
Shads 1. Remember that the majority of Australians think house price inflation is a bad thing. 2. 31% are owners and the rest are buyers. 3. I am not convinced that the 31% would care if house prices fell 50% as they could sell and buy something at the new prices.
1. Remember that the majority of Australians think house price inflation is a bad thing. 2. 31% are owners and the rest are buyers. 3. I am not convinced that the 31% would care if house prices fell 50% as they could sell and buy something at the new prices.
1. Find me any survey that says the majority of voters would prefer the value of their house to fall rather than rise.
2. No, our home ownership rate is just over two thirds. You keep forgetting that there are two types of owner - outright owners, and owners with a mortgage. In both cases they already own the house (their name is on the title) and the house has already been bought from the prior owner.
3. Most people like their home (that's why they bought it). They would prefer the price to rise so they can stay where they are and simply access the equity, and use that to invest in more property, shares, start a small business etc. It makes people feel wealthier when their major asset rises in value.
Veritas
14 Jul 2014, 07:56 PM
So it is a risk free investment?
no matter what, Government will shore up your investments.
Yes, as long as they can do it, then the government and RBA will always support the housing sector. The only time they wouldn't do it is when they literally can't - i.e. interest rates can't possibly be cut any further, and government debt is too high to allow further stimulus borrowing.
They are low by modern Australian standards (i.e. compared to the 70s, 80s and 90s), but they are still at levels consistent with most of the past 160+ years.
I have never said interest rates are not low. I have said they are not at historic/unprecedented/emergency/artificial lows.
Rates are low, but they have also been this low for very long periods of time in the past.
Your capacity for disingenuity is a work of art.
By the way, lowering rates is a stimulus. Low rates are a state. If the signal changes, it stimulates. If it stays constant, it is a steady state. If the signal doesn't change, humans experience something called 'extinction', in which the signal is no longer perceived. When it changes, the senses are stimulated.
Never mind. Let's just stick with the fact that you have never been wrong once in your life, and you never will be.
1. Find me any survey that says the majority of voters would prefer the value of their house to fall rather than rise.
2. No, our home ownership rate is just over two thirds. You keep forgetting that there are two types of owner - outright owners, and owners with a mortgage. In both cases they already own the house (their name is on the title) and the house has already been bought from the prior owner.
3. Most people like their home (that's why they bought it). They would prefer the price to rise so they can stay where they are and simply access the equity, and use that to invest in more property, shares, start a small business etc. It makes people feel wealthier when their major asset rises in value.
Yes, as long as they can do it, then the government and RBA will always support the housing sector. The only time they wouldn't do it is when they literally can't - i.e. interest rates can't possibly be cut any further, and government debt is too high to allow further stimulus borrowing.
Quote:
Yes, as long as they can do it, then the government and RBA will always support the housing sector. The only time they wouldn't do it is when they literally can't - i.e. interest rates can't possibly be cut any further, and government debt is too high to allow further stimulus borrowing.
Or even at ZIRP and with free money you cant convince enough people to buy an overpriced shitbox 50ks from anywhere and prices fall anyway.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
By the way, lowering rates is a stimulus. Low rates are a state. If the signal changes, it stimulates. If it stays constant, it is a steady state. If the signal doesn't change, humans experience something called 'extinction', in which the signal is no longer perceived. When it changes, the senses are stimulated.
No... interest rates continue to stimulate for a long time after the rates have actually been changed. In fact there is some evidence to suggest it takes 6+ months before the effects of an interest rate change are fully felt across the economy. For example, it is often up to a year after the start of an interest rate cutting cycle before house prices actually start to rise.
Interest rates in Australia have not been cut for a year, but the current setting is still stimulatory, and house prices are rising as a result.
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Let's just stick with the fact that you have never been wrong once in your life, and you never will be.
I have been wrong occasionally, and I always acknowledge it when it happens. But this isn't one of those times.
Veritas
14 Jul 2014, 08:21 PM
Or even at ZIRP and with free money you cant convince enough people to buy an overpriced shitbox 50ks from anywhere and prices fall anyway.
Yes, that's one of the examples I gave - when rates can't be cut any further then the RBA loses a lot of its power to protect house prices.
Agreed, if there is no demand for houses there is no demand for credit.
Any other statements of the blindingly obvious?
Still missing the point completely. Probably deliberately.....
Quote:
Except it was a one off adjustment in other countries too ( Ireland, Spain, USA) until it wasn't.
None of that changes the fact that there was a "one off" structural adjustment to prices in Australia, driven by the very reasons you stated. We had the GFC too, you know - ("G" stands stand for "Global"), but had a smaller house price correction - our prices hadn't risen as much, we didn't over-build, we had faster government response to the crisis etc etc - but you know all this.
Who knows, maybe one day we will gave another structural change that lowers prices significantly, but personally I don't see that anywhere on the horizon. You should have bought back in 2008 when you were probably thinking about it, but decided instead to "wait for the crash"!
For Aussie property bears, "denial", is not just a long river in North Africa.....
No... interest rates continue to stimulate for a long time after the rates have actually been changed.
It is the response that continues. The stimulus is always the change in state or signal. The stimulus usually produces a response. The response becomes learned behaviour. The stimulus however is always the initial change in state or signal.
Quote:
In fact there is some evidence to suggest it takes 6+ months before the effects of an interest rate change are fully felt across the economy.
So it takes 6+ months to develop a response.
Quote:
For example, it is often up to a year after the start of an interest rate cutting cycle before house prices actually start to rise.
Which doesn't change the fact that the stimulus occurred before the response of rising prices, not during it.
Quote:
Interest rates in Australia have not been cut for a year, but the current setting is still stimulatory, and house prices are rising as a result.
The current setting is the new steady state until the signal changes again. The economic signal might change for the worse, or better, which would be a stimulus for a new response. Once the response to the stimulus was effected, that would be the new steady state.
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I have been wrong occasionally,
I very much doubt that.
Quote:
and I always acknowledge it when it happens.
I would need evidence of this before I believed you.
It is the response that continues. The stimulus is always the change in state or signal. The stimulus usually produces a response. The response becomes learned behaviour. The stimulus however is always the initial change in state or signal.
The current setting is the new steady state until the signal changes again. The economic signal might change for the worse, or better, which would be a stimulus for a new response. Once the response to the stimulus was effected, that would be the new steady state.
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