Incorrect. Dynamic and static things can both provide support.
But in terms of the housing market, nothing is static. All the fundamentals supporting the housing market are dynamic.
Perhaps you can enlighten us all then on how dynamic replacement costs support house prices.
Quote:
I doubt you'll ever think like me. You've spent the past three years being completely wrong about the housing market. All your bearish predictions have failed to eventuate. You have got nothing right. On the other hand I have been pretty accurate with most of my predictions since I started posting on forums like this in 2007.
I certainly hope that my brain never deteriorates so much that I think like you but no one (except you of course) can predict the future. If I've got nothing right then you can surely list just a few of my inaccurate predictions. But wait, we've been down this road before and you can't.
Perhaps you can enlighten us all then on how dynamic replacement costs support house prices.
It was already explained earlier in the thread by Sydneyite and myself. Go back and read the thread, I'm not going to repeat it all again.
Quote:
I certainly hope that my brain never deteriorates so much that I think like you but no one (except you of course) can predict the future. If I've got nothing right then you can surely list just a few of my inaccurate predictions. But wait, we've been down this road before and you can't.
Can't be bothered trawling through three years of posts, but a couple below from 2011 sum up your general outlook - i.e. 'huge bubble is about to burst and prices can't get any higher'. Your posts below are from your first month on the forum in 2011. You've spent three years since then posting similar nonsense... and getting it all wrong.
'Australia got "lucky", the housing market correction was lagging behind the rest and the RBA over-reacted with 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'
'Property crashes in the US, UK, Ireland etc. show that prices fall with falling interest rates. It is a fallacy to believe that lower rates can offset a falling market.'
In both cases above, I called you on your silly predictions at the time in those threads, and you slunk away without responding. You were wrong to say it can't happen again, because it did. Prices have risen since 2011. You were also wrong to say lower rates can't offset a falling market. They can and they did since 2011.
You've been wrong about everything. But carry on thinking you are wiser and better than the 'foolish' bulls if that makes you feel better.
It was already explained earlier in the thread by Sydneyite and myself. Go back and read the thread, I'm not going to repeat it all again.
Yer, I've read it and your both deluded. I'm giving you a chance here to convince me. You only have to cut & paste what you feel are the salient points but it doesn't surprise me that your going to back down. You know that if replacement costs are dynamic, which you have now agreed to, that there is no support for house prices.
Yer, I've read it and your both deluded. I'm giving you a chance here to convince me. You only have to cut & paste what you feel are the salient points but it doesn't surprise me that your going to back down. You know that if replace costs are dynamic there is no support for house prices.
Tonypandy is small Welsh town in the Rhonda Valley where the main industry was coal mining. It had a thriving economy and house prices averaged just below the UK average. In 1982 the local colliery was unexpectedly shut down leading to overnight mass unemployment. In 1983 you could buy a house in Tonypandy for the price of second hand car.
There is no such thing as a floor under the price of a house.
You also hear the same argument from Gold bugs. Gold costs $1200 per oz to mine so it can't go below $1200.
I buy gold but I don't buy it with the idea that it has a floor of $1200 oz underneath it.
I buy it with the idea in the back of my head that someone could find Lasseter's Reef and it would weigh a million tons (rendering my gold practically worthless). I take a risk when I buy gold and everyone who buys property as an investment takes a risk as well.
If you don't consider the worst case scenario in any market, then you are just a fool and his money looking to be parted.
Edit. If you are looking to buy a house to live in, anytime is the right time. Once you have bought the house, it doesn't matter if prices go up or down. In fact, the best thing that can happen to an owner occupier is a price drop. If prices go down, you can trade up for less because the spread between price bands has also fallen. Also, your children will have a better chance of buying in a cheaper market. Price doesn't matter if you are an owner occupier. Much the same if you are buying a wedding ring. Do you look at the gold markets before you buy? You don't, because you are not buying an investment. You are buying a wedding ring.
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.
'Australia got "lucky", the housing market correction was lagging behind the rest and the RBA over-reacted with 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'
Is that really the best that you can come up with. Two early non-predictions where my facts were correct?
'Australia did get "lucky". The housing market correction was lagging behind the rest and the RBA did over-reacted with massive interest rate cuts, stimulus and grants.
They did make a serious bubble a whole lot worse.
Did it happen again? What do you think? Have the RBA made a serious bubble a whole lot worse?
'Property crashes in the US, UK, Ireland etc. show that prices fall with falling interest rates. It is a fallacy to believe that lower rates can offset a falling market.'
When the GFC happened lower rates didn't offset a falling market. The market correction continued. That's why massive grants and simulus were required.
Jimbo
8 Aug 2014, 08:17 PM
Tonypandy is small Welsh town in the Rhonda Valley where the main industry was coal mining. It had a thriving economy and house prices averaged just below the UK average. In 1982 the local colliery was unexpectedly shut down leading to overnight mass unemployment. In 1983 you could buy a house in Tonypandy for the price of second hand car.
There is no such thing as a floor under the price of a house.
You also hear the same argument from Gold bugs. Gold costs $1200 per oz to mine so it can't go below $1200.
I buy gold but I don't buy it with the idea that it has a floor of $1200 oz underneath it.
You are correct.
The price of any product is based on supply and demand NOT what it cost to produce.
For certain commodities a drop in price may lead to a drop in supply while production costs make it unprofitable but this certainly doesn't apply to property where the main input is land with effectively zero production cost.
The gold price is more like property in this respect than a commodity.
'Australia did get "lucky". The housing market correction was lagging behind the rest and the RBA did over-reacted with massive interest rate cuts, stimulus and grants.
The Australian market got lucky because the Chinese reaction to the GFC was to go infrastructure crazy. Our Dollar collapsed during the GFC but quickly recovered when the world realised that China was going to buy as much as we could pull out of the ground. And so China bought as much as we could pull out of the ground but we couldn't pull it out fast enough. So we ramped up everything to enable us to dig up more stuff. Meanwhile, Julia and Kevin gave us all some free money and BHP and RIO paid everyone a $1000 a day to clean toilets for two hours and attend tool box meetings for the remaining eight hours. We spent our money on Holdens and Fords and investment properties. Property went up because we all wanted 10 or 11 of them for our old age. Now we have a debt, an austerity program, nobody buying Holdens and toilet cleaning is no longer in demand. But don't worry, because interest rates are going lower and staying there because the RBA controls a currency that makes up 1.7% of the world economy and therefore has the clout to do what it wants.
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.
Did it happen again? What do you think? Have the RBA made a serious bubble a whole lot worse?
Prices rose. If you believe there is a bubble then it must have gotten worse. So it did happen again, contrary to your claim that only a fool would believe it could happen again.
Quote:
It is a fallacy to believe that lower rates can offset a falling market
Lower rates led to prices rising in 2009, and again in 2012. It is widely accepted that the current boom is driven by low rates.
The Australian market got lucky because the Chinese reaction to the GFC was to go infrastructure crazy. Our Dollar collapsed during the GFC but quickly recovered when the world realised that China was going to buy as much as we could pull out of the ground. And so China bought as much as we could pull out of the ground but we couldn't pull it out fast enough. So we ramped up everything to enable us to dig up more stuff. Meanwhile, Julia and Kevin gave us all some free money and BHP and RIO paid everyone a $1000 a day to clean toilets for two hours and attend tool box meetings for the remaining eight hours. We spent our money on Holdens and Fords and investment properties. Property went up because we all wanted 10 or 11 of them for our old age. Now we have a debt, an austerity program, nobody buying Holdens and toilet cleaning is no longer in demand. But don't worry, because interest rates are going lower and staying there because the RBA controls a currency that makes up 1.7% of the world economy and therefore has the clout to do what it wants.
Jimbo, this is about right.
No one knew the extent to which China would continue to expand after the GFC. In hindsight the RBA's over-reaction looks silly. If only they had had access to Shadows crystal ball.
Australia's economic situation is not currently great but it's a lot better than most. Given this, IR's of 2.5% compared to the rest of the western world's near zero rates looks about right.
The gold price is more like property in this respect than a commodity.
Nothing has intrinsic value unless you require it to survive.
"A dying king would exchange his empire for another breath"
That is an extreme example, but it forms the basis of value in any investment. Property is a good thing to have when times are stable but have you ever wondered why French and Belgian property was so cheap in the 50's and 60's? Maybe because two world wars had taught them that land ownership is by Fiat only. If there is a new governing power, you can kiss goodbye to your title.
Of course, WWI and II will never happen again because even though there are far more of us with less land and resources to share than there were 100 years ago, we now get along so much better. So we will just continue forever, living in harmony, side by side on my piano with low interest rates forever and house prices reaching for the stars. Bloody perfect.
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.
Prices rose. If you believe there is a bubble then it must have gotten worse. So it did happen again, contrary to your claim that only a fool would believe it could happen again.
If you don't believe there is a bubble then I got it right. I'll ask you again, what do you believe?
Quote:
Lower rates led to prices rising in 2009, and again in 2012. It is widely accepted that the current boom is driven by low rates.
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? If so, you're beliefs are caving in everywhere.
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