Writers don't get to choose their own titles. The papers have editors who come with headlines that they think will get the most hits. The content of the article is the writers own words but the title is just something vaguely based on the article but created by someone else. An article titled 'Potential Bubble May Be Emerging' is not as attention grabbing as 'Bubble Here Now'. More clicks = more revenue.
Click on 'Prices against average income' and then add Australia to the chart. It will look like this...
Our price/income ratio today is roughly where it was a decade ago.
If housing has been unaffordable for a decade then how come so many people have been able to buy homes over the past decade?
Roughly half a million homes are bought every year, and mortgage default rates are very low, so it seems plenty of people are able to afford these 'unaffordable' homes.
Just because you can't afford to buy a home doesn't mean nobody else can.Here's another recent price/income ratio chart published by permabear Callum Pickering on Business Spectator last week...
More smoke and mirrors from shadow. It was widely recognised to be a bubble ten years ago!
Recognised by who? Silly bears?
If it was a bubble a decade ago then why didn't it burst?
Every single bubble in history (across all asset classes) has been characterised by a strong rise in price/income ratios over many years until prices hit an unsustainable peak level, upon which the bubble immediately popped. There has never been a bubble in history that popped after a decade of relatively stable price/income ratios. The fact that current price/income ratios in Australia have been sustained for over a decade suggests that this level is sustainable.
So you seem to be saying Australia has a special new type of bubble unlike any bubble ever experienced before in the world.
Of course the simpler and more sensible explanation is that it is not a bubble.
Well the Bulls line is that its been like this for ten years give or take so that boom in prices was structural and sustainable.
They will also argue that bubbles rise than fall not totter along for a deacade at the high price plateau.
I think so little is understood about Bubbles, especially house price bubbles, that this is nonsense.
Actually, I think the story of the great neoliberal experiment with housing is still unfolding.
Shadow
19 Jul 2014, 08:41 PM
Recognised by who? Silly bears?
If it was a bubble a decade ago then why didn't it burst?
Every single bubble in history (across all asset classes) has been characterised by a strong rise in price/income ratios over many years until prices hit an unsustainable peak level, upon which the bubble immediately popped. There has never been a bubble in history that popped after a decade of relatively stable price/income ratios. The fact that current price/income ratios in Australia have been sustained for over a decade suggests that this level is sustainable.
So you seem to be saying Australia has a special new type of bubble unlike any bubble ever experienced before in the world.
Of course the simpler and more sensible explanation is that it is not a bubble.
But how many housing bubbles have there been?
Your argument is piss weak really.
If we had more to go on in terms of historical experience I would have more sympathy but the fact of the matter is that the nexus between big finance and housing is quite new. Globally.
There is no iron law of bubble as you are suggesting and I defy you to find anyone of repute that says there is.
You are the only one saying it from the research Ive done.
Can you provide evidence to suggest that you are not an army of one in this regard?
I think we are only two or three acts into a four act play myself.
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
If it was a bubble a decade ago then why didn't it burst?
Every single bubble in history (across all asset classes) has been characterised by a strong rise in price/income ratios over many years until prices hit an unsustainable peak level, upon which the bubble immediately popped. There has never been a bubble in history that popped after a decade of relatively stable price/income ratios. The fact that current price/income ratios in Australia have been sustained for over a decade suggests that this level is sustainable.
So you seem to be saying Australia has a special new type of bubble unlike any bubble ever experienced before in the world.
Of course the simpler and more sensible explanation is that it is not a bubble.
The chart you used in your post tells the whole story chief, look at how it peaks around 2003 and well above the "long run average".
If it was a bubble a decade ago then why didn't it burst?
Every single bubble in history (across all asset classes) has been characterised by a strong rise in price/income ratios over many years until prices hit an unsustainable peak level, upon which the bubble immediately popped. There has never been a bubble in history that popped after a decade of relatively stable price/income ratios. The fact that current price/income ratios in Australia have been sustained for over a decade suggests that this level is sustainable.
So you seem to be saying Australia has a special new type of bubble unlike any bubble ever experienced before in the world.
Of course the simpler and more sensible explanation is that it is not a bubble.
Live and learn Shadey.
Live and learn!
WHAT WOULD EDDIE DO? MAAAATE! Share a cot with Milton?
If it was a bubble a decade ago then why didn't it burst?
Every single bubble in history (across all asset classes) has been characterised by a strong rise in price/income ratios over many years until prices hit an unsustainable peak level, upon which the bubble immediately popped. There has never been a bubble in history that popped after a decade of relatively stable price/income ratios. The fact that current price/income ratios in Australia have been sustained for over a decade suggests that this level is sustainable.
So you seem to be saying Australia has a special new type of bubble unlike any bubble ever experienced before in the world.
Of course the simpler and more sensible explanation is that it is not a bubble.
Yes Shadow, Australia is very different with NG, there is nothing like it (comparing apples for apples) in the world. Over the period you mentioned how many of this 500,000pa were investors??
And do me a favour and get some black and white figures for this income price ratio. The income and price it was based off in 2003, and the income and price in 2013.
No graphs no BS just black and white figures, maybe then I can take what you say seriously?'
Yes Shadow, Australia is very different with NG, there is nothing like it (comparing apples for apples) in the world. Over the period you mentioned how many of this 500,000pa were investors??
And do me a favour and get some black and white figures for this income price ratio. The income and price it was based off in 2003, and the income and price in 2013.
No graphs no BS just black and white figures, maybe then I can take what you say seriously?'
maybe you can get your own facts right first?
in the USA negative gearing is even more generous, it also exists in other countries like germany, sweden, NZ the list is pretty long.
Prices are merely the symptom of a bubble. The bubble is in affordability. People are earning a lot, but they are not producing very much.
The price of iron ore is a reflection of the willingness of Asians to do all the work, while we in the west pay ourselves the rewards. But what about when they are no longer willing? What happens when Asians experience high inflation, and demand higher wages in compensation? What happens when China's own credit bubble bursts? What happens when US Treasuries start rapidly losing value, and Asians see their savings melting away? When the BRICs form their own bank to finance each others growth, and trade agreements that settle in currencies other than US dollars, what then?
The leadership of this country are either clueless or lying to us. Witness Glenn Stevens 'surprise' that the Australian dollar remains so high while commodity/trade demand has fallen. Surely the head of the central bank has heard of a carry trade. Surely the head of the central bank knows that forex and credit markets dwarf actual trade in real goods and services when it comes to exchange rates.
Yes, Australians can afford to buy homes, and buy them they do. It is not the prices that are the mirage, it is the affordability.
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