The fundamentals are constantly changing. They have changed many times over the past decade, yet the current price/income ratio has been sustained.
So no, I don't think it's necessary for all the fundamentals to remain the same. I expect them to keep changing as they have done over the past decade.
Ergo, your position is that the Price to income ratio of ten years ago serves as a floor through which prices cant fall.
That is totally daft reasoning.
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
your position is that the Price to income ratio of ten years ago serves as a floor through which prices cant fall
Incorrect. Prices could certainly fall to much lower price/income ratios, or rise to much higher price/income ratios, if the fundamentals change drastically enough. My position is simply that I think the most likely outcome will be price/income ratios remaining close to current levels for some time to come.
If we do get a bubble as Chris Joye predicts then we could see price/income ratios rise higher, but I expect they will then just fall back to current levels again after a while. The current ratio appears to be sustainable, but I'm not as certain that we could sustain a significantly higher price/income ratio for very long.
The fundamentals are constantly changing. They have changed many times over the past decade, yet the current price/income ratio has been sustained.
So no, I don't think it's necessary for all the fundamentals to remain the same. I expect them to keep changing as they have done over the past decade.
Incorrect. Prices could certainly fall to much lower price/income ratios, or rise to much higher price/income ratios, if the fundamentals change drastically enough. My position is simply that I think the most likely outcome will be price/income ratios remaining close to current levels for some time to come.
If we do get a bubble as Chris Joye predicts then we could see price/income ratios rise higher, but I expect they will then just fall back to current levels again after a while. The current ratio appears to be sustainable, but I'm not as certain that we could sustain a significantly higher price/income ratio for very long.
Has Bullhawk offered any qualifications on the many interpretations of CJ's position.
He usually has something worthwhile to say.
Any expressed market opinion is my own and is not to be taken as financial advice
Are we to deduce that your belief is that price/income ratios will therefore remain unaffected as they have in the last decade or are you going to grow some balls and state something in black and white?
I can't state anything about the future in 'black and white' since the future is mostly unknowable. I can only give my opinion on what the future holds. Price/income ratios could shift up or down significantly if the fundamentals change drastically enough, but my 'base case' is simply for ratios to remain close to current levels over the medium to long term. Even if Chris Joye is right about the coming bubble, and it takes price/income ratios to much higher levels, I expect they would eventually just fall back to current levels again after a while anyway. I'm sorry if that's not 'black and white' enough for you. If you want a more definite picture of the future then you could try a clairvoyant, or some form of time travel if possible.
I can't state anything about the future in 'black and white' since the future is mostly unknowable. I can only give my opinion on what the future holds. Price/income ratios could shift up or down significantly if the fundamentals change drastically enough, but my 'base case' is simply for ratios to remain close to current levels over the medium to long term. Even if Chris Joye is right about the coming bubble, and it takes price/income ratios to much higher levels, I expect they would eventually just fall back to current levels again after a while anyway. I'm sorry if that's not 'black and white' enough for you. If you want a more definite picture of the future then you could try a clairvoyant, or some form of time travel if possible.
Cool story bro.
Think this thread is done.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
We are allmost a mirror image of Japan, except we inflate- they deflate.
It seems so obvious to me, just from the charting, where we go next.
Glad I have only $1000 in debt! ($0.92c per month interest repayments) to turn my place into an atm @ the drop of the hat.
Why should we head even cheaper?
Japan( $11,466 per sqm) is currently much more expensive than Australia ($7,626 per sqm) even after all the falls. Why should a country with an inflated price and a falling population be so much more expensive than Australia with its vibrant growing cities?
IMHO Australian house prices have nowhere to go but up, we are hardly back at 2007 prices in most areas, housing in Australia has rarely stayed stagnant for that long before.
I am just being a realist here, we should not be encouraging young people to believe in magical fanciful stories of never before changes to the way our housing market works. It is a big big call to bet on a cheap house dream, house prices rise in growing cities.
This is a rich country and people are ahead on their mortgages, have low interest rates and have super funds to fall back on before you are likely to see a housing fire sale.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Japan( $11,466 per sqm) is currently much more expensive than Australia ($7,626 per sqm) even after all the falls. Why should a country with an inflated price and a falling population be so much more expensive than Australia with its vibrant growing cities?
IMHO Australian house prices have nowhere to go but up, we are hardly back at 2007 prices in most areas, housing in Australia has rarely stayed stagnant for that long before.
I am just being a realist here, we should not be encouraging young people to believe in magical fanciful stories of never before changes to the way our housing market works. It is a big big call to bet on a cheap house dream, house prices rise in growing cities.
This is a rich country and people are ahead on their mortgages, have low interest rates and have super funds to fall back on before you are likely to see a housing fire sale.
You sound confused skamy..
But this bit was good. "IMHO house prices have nowhere to go but up". And you just bought more leveraged up property in perth. So skamy , to you admit rents are dropping in Perth ?
While I am here , something I read somewhere the other day , gave me the impression you are just a little old lady. Is this correct ?
Japan( $11,466 per sqm) is currently much more expensive than Australia ($7,626 per sqm) even after all the falls. Why should a country with an inflated price and a falling population be so much more expensive than Australia with its vibrant growing cities?
I have to say, that website is the most ridiculous I've seen in ages...
First, they count only apartments, in the most expensive areas, in the most important capital city of each nation, and pass the figure off as a national price.
Second, you're comparing a tiny area of Sydney, with at most, a population of 50,000; with a tiny area of Tokyo, with at least a population of 500,000.
And it's not even realistic...
Where in Sydney, can you buy an apartment for less than $100,000?
Go less than 10km outside of Tokyo CBD, and you'll find places like this...
2LDK Apartment to Buy in Katsushika-ku - Price: ¥8,000,000 (US $80,000)
"If man is to survive, he will have learned to take a delight in the essential differences between men and between cultures. He will learn that differences in ideas and attitudes are a delight, part of life's exciting variety, not something to fear." - Gene Roddenberry
"Balloon animals are a great way to teach children that the things they love dearly, may spontaneously explode" -- Lee Camp
Perhaps Financial Deregulation and interest rate cuts didn't come into effect there until then?
There must be something else at work here. Hmmmm....
Anyway, your net point seems to be that the price/income ratio hit the sweet spot in 2003 after the structural shift caused by financial deregulation and other stuff affecting the price and availability of money and that's about it.
Who knew that the market for housing could deviate from other economic fundamentals so radically. Its nothing short of miraculous!
Yes strangely house prices crashed like a stone during the biggest mining investment period in our history. Population growth in the city was huge, rents soared and house prices fell.
You wouldn't believe it if you didn't know it to be true hey?
MMM
23 Jul 2014, 11:30 PM
You sound confused skamy..
But this bit was good. "IMHO house prices have nowhere to go but up". And you just bought more leveraged up property in perth. So skamy , to you admit rents are dropping in Perth ?
While I am here , something I read somewhere the other day , gave me the impression you are just a little old lady. Is this correct ?
Ted, you get confused as you live in this deep dark gloomy place with all these doomsters and the light of reality blinds you. I have just been pulling together the median price data for Sydney and Perth and the downturn that we are ow emerging from was one of the largest house price corrections since 1970.
Someones sold u a big lemon suggesting prices will fall again now the rest of the world and Australia are just recovering from the GFC.
Yes, I am JUST a little old lady Ted, 5 feet 3 to be exact. Something you said the other day gave me the impression that you were JUST some gloomy young boy, still a bit wet behind the ears perhaps -if the story that you had sold a good Sydney house in the middle of a downturn is true.
Yes Ted, rents are dropping in Perth as they do when lots of young people drop out of the rental market and buy their own homes. I have a feeling rents wont stay down for long with this big construction boom coming down the track? My property purchases in Perth are doing very well, you should have joined me in 2011. With a little IP here you would have got fabulous rental returns followed by some great capital gains. Those doomsters led u astray back then - ya should have taken this little old lady's advice back then hey?
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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