No one knew the extent to which China would continue to expand after the GFC.
The Chinese played a very clever game during the GFC. They went from an agricultural dinosaur to a world power in an nano second. I was there for a year and I saw some insane things. They have cities that make Sydney look like a village. The scale of development is beyond comprehension and needs to be seen to be believed.
They have factory complexes bigger than Perth (not hard). They create new cities out of nothing.
They consume 33% of the worlds steel production every year.
While the rest of us were recovering from the GFC hangover, they were building a new USA overnight.
If you have a bucket list of places to visit, put China on top. Man, what an eye opener.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
If you have a bucket list of places to visit, put China on top. Man, what an eye opener.
I'd love to visit the place, it sounds crazy.
One statistic I heard recently was that china has used more concrete in the last 3 years than the USA has used ever. Certainly makes you think.
In many respects they are also the worlds most capitalistic country. Factories fold in a day when the market goes against them and a new factory takes it's place almost immediately. You've got to balance that against human rights/pollution etc. though.
In many respects they are also the worlds most capitalistic country. Factories fold in a day when the market goes against them and a new factory takes it's place almost immediately. You've got to balance that against human rights/pollution etc. though.
Very true, China is more of a capitalist country than Australia and the USA. In China, a poor man can set up a single gas burner stove outside a train station and fry noodles for a living. That gives him a leg up. If he sells bad food, nobody buys his noddles. If he is good he gets more business. That is true free market enterprise.
In the USA or Australia, you need a food safety level 3, local council permits, business registration blah blah blah.
How would Richard Branson have done if he wasn't able to sell vinyl records from the boot of his car?
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
If you don't believe there is a bubble then I got it right.
No, you got it wrong. You believed another up cycle was not possible...
'massive interest rate cuts, stimulus and grants and suceeded in making a serious bubble a whole lot worse. You really are a fool if you think this can happen again'
Same as always. The housing market is very sensitive to interest rates, and low enough rates always drive prices higher.
Also, as discussed earlier, while house prices can certainly fall, they won't fall below replacement cost on anything more than a temporary basis, because if they did then building activity would stall until prices rise back above replacement cost again. Therefore replacement cost acts as a support for house prices.
In some places like Detroit where the population is in decline, there are supposedly some houses selling for a dollar. But those are isolated cases of individual houses, the median house price in Detriot is not one dollar, and development activity in the worst hit areas has stalled and will not resume unless prices in those areas rise back above replacement cost.
If you think you can find an example of median house prices remaining below replacement cost anywhere in the world, while development activity continues and the population grows, then I'd be interested to see your evidence. Over to you.
Quote:
Agreed, but they didn't stop the fall once it started, that was grants etc. so I was correct.
Are you one of those who now accepts that the current boom is driven by low rates?
No, you were wrong. We actually had this discussion a couple of years ago. You claimed the 2009 boom was purely a result of the FHB grants, and that the rate cuts were irrelevant. You also claimed that in the absence of grants in 2012, the interest rate cuts alone would be unable to make prices rise again.
We actually debated this many times back then, and your general view was that... 'It is a fallacy to believe that lower rates can offset a falling market'. You said I was a fool for thinking interest rate cuts drove prices higher. You said house prices would fall along with the rate cuts.
But I pointed out the fact that the housing market is very interest rate sensitive, and that the 2009 boom was predominantly driven by low interest rates, since low rates apply to all borrowers whereas FHB grants only apply to a small sector of the market. I said the new round of rate cuts would drive another boom, despite the absence of FHB grants this time. And that is exactly what happened.
Deep down, I know you realise you were wrong and I was right, but you just can't bear to admit it.
Quote:
If so, you're beliefs are caving in everywhere.
Give me some example of these beliefs that you believe have caved in. Links please?
while house prices can certainly fall, they won't fall below replacement cost on anything more than a temporary basis, because if they did then building activity would stall until prices rise back above replacement cost again. Therefore replacement cost acts as a support for house prices.
Replacement cost is only the cost of building a new house. This is also somewhat flexible in that during downturns, labour costs are lower and materials margins are reduced by the materials suppliers.
Land value is the single largest component of a homes price. You can build a simple house for $100k. Put it in Chelsea in London and it is worth 8 million pounds. Put it in Nedlands in Perth and it is $4 million. Put it in Dover in Tassie and it is worth $133k.
I have never bought a house in my life. I have bought land in a location that happens to have a house sitting on it.
I know someone who bought the cheapest block in a new suburb south of Perth and built the most expensive two storey house he could (we all know someone like that). It is right next to a main road, 2kms from the beach, opposite the shopping centre and adjacent to the high school. It has a bus stop right outside (convenient). It has a solid Jarrah balcony that can fit fifty people which overlooks the local Maccas. He has a double height garage for his boat and the whole house is smart wired so he can switch stuff on and off via his Iphone.
He reckons his place is worth 800k because he spent 500k on the build and 200k on the block and houses have gone up since he bought. Thing is, anyone with 800k isn't going to buy his house when they could buy good quality absolute beachfront property in the same suburb for the same price. The house two doors down from him sold for $310k a month ago.
This is one (extreme) example where replacement cost far exceeds the value of the property. I thought I would share it because I find it funny that dickheads like this actually exist.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
He reckons his place is worth 800k because he spent 500k on the build and 200k on the block and houses have gone up since he bought. Thing is, anyone with 800k isn't going to buy his house when they could buy good quality absolute beachfront property in the same suburb for the same price. The house two doors down from him sold for $310k a month ago.
This is one (extreme) example where replacement cost far exceeds the value of the property.
The replacement cost in that suburb isn't the $700K that your acquaintance spent on his home.
The replacement cost is the cost that a typical developer would incur to bring a typical home to market. This is the cost that supports prices in the suburb.
The Chinese played a very clever game during the GFC. They went from an agricultural dinosaur to a world power in an nano second. I was there for a year and I saw some insane things. They have cities that make Sydney look like a village. The scale of development is beyond comprehension and needs to be seen to be believed.
They have factory complexes bigger than Perth (not hard). They create new cities out of nothing.
They consume 33% of the worlds steel production every year.
While the rest of us were recovering from the GFC hangover, they were building a new USA overnight.
If you have a bucket list of places to visit, put China on top. Man, what an eye opener.
Their problem is access to the world's resources, to get them they must the US a tax.
The next trick of our glorious banks will be to charge us a fee for using net bank!!! You are no longer customer, you are property!!!
No, you got it wrong. You believed another up cycle was not possible...
'massive interest rate cuts, stimulus and grants and suceeded in making a serious bubble a whole lot worse. You really are a fool if you think this can happen again'
Shadow, once again you've backed yourself into a corner.
You now need to accept that there's a serious bubble in an attempt to prove me wrong but even then you can't because we haven't had a repeat of the massive interest rate cuts, stimulus and grants.
To prove me wrong you need to accept that there's a bubble and show that the current expansion of the bubble was aided by stimulus and grants. If you can't then you are still as deluded as I thought you were.
Quote:
Also, as discussed earlier, while house prices can certainly fall, they won't fall below replacement cost on anything more than a temporary basis, because if they did then building activity would stall until prices rise back above replacement cost again. Therefore replacement cost acts as a support for house prices.
Total crap. Land prices can fall until replacement cost is low enough to make building profitable?
Quote:
If you think you can find an example of median house prices remaining below replacement cost anywhere in the world, while development activity continues and the population grows, then I'd be interested to see your evidence. Over to you.
How about I show you evidence of house prices falling and land prices falling too making building still profitable?
Quote:
No, you were wrong. We actually had this discussion a couple of years ago. You claimed the 2009 boom was purely a result of the FHB grants, and that the rate cuts were irrelevant. You also claimed that in the absence of grants in 2012, the interest rate cuts alone would be unable to make prices rise again.
The recovery from the 2009 slump was the result of grants, this is clearly evident from the charts. Grants were need because interest cuts alone were unable to halt the decline and the RBA panicked. Subsequently the continued expansion of the property bubble was a result of low interest rates and easy credit (not grants) exactly as I originally said.
Quote:
But I pointed out the fact that the housing market is very interest rate sensitive, and that the 2009 boom was predominantly driven by low interest rates, since low rates apply to all borrowers whereas FHB grants only apply to a small sector of the market.
House price charts clearly show that the grants created the 2009 boom so you were wrong. If lower interest rates were doing their job as you say, then the grants would have been unnecessary.
You are fighting a losing battle on all fronts. Your replacement costs theory is complete garbage and your attempt to obfuscate matters by opening up old quotes from years ago has failed.
You now need to accept that there's a serious bubble in an attempt to prove me wrong
No, all I need to do is show that prices have risen since 2011, contrary to your expectations of a crash, your belief that prices would fall with falling interest rates, and that we would have a global deflationary depression that 'cannot be avoided' etc etc.
Quote:
Total crap. Land prices can fall until replacement cost is low enough to make building profitable?
No, a fall in land prices would cause a fall in sale prices (the land value is a major component of the total property value).
It would still not be profitable for developers to bring homes to market if they can't sell those homes for more than the cost of bringing them to market.
Quote:
How about I show you evidence of house prices falling and land prices falling too making building still profitable?
Show me examples of places where house prices remain below replacement cost, yet developers are still developing new stock.
Quote:
Grants were need because interest cuts alone were unable to halt the decline and the RBA panicked.
Grants have nothing to do with the RBA. The grants (provided by government, not the RBA) did help a subset of buyers, but it was the interest rate cuts that drove the boom in 2009 (same as today) since all buyers and owners benefit from lower rates.
Quote:
House price charts clearly show that the grants created the 2009 boom so you were wrong. If lower interest rates were doing their job as you say, then the grants would have been unnecessary.
The grants were unnecessary. Interest rate cuts alone would have led to increased prices in 2009, as they are doing today. Note that there is always a fairly long lag between rate cuts/rises and the market turning around. It is possibly this lag that causes you to misinterpret the effect of the rate cuts.
Quote:
You are fighting a losing battle on all fronts. Your replacement costs theory is complete garbage and your attempt to obfuscate matters by opening up old quotes from years ago has failed.
It's not a battle. Try not to lose your temper. We're just having a discussion. Relax.
The recovery from the 2009 slump was the result of grants, this is clearly evident from the charts. Grants were need because interest cuts alone were unable to halt the decline and the RBA panicked. Subsequently the continued expansion of the property bubble was a result of low interest rates and easy credit (not grants) exactly as I originally said.
"The recovery from the 2009 slump was the result of grants... Subsequently the continued expansion of the property bubble was a result of low interest rates and easy credit (not grants)..."
I'm confused - are you saying it was grants or not, or have you just made a typo?
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy