They have to go higher, less people are buying in a recession so the undersupply increases. In addition the only ones who do buy are those with the cash or the assets, and that's the existing property owners, so the ownership becomes even more concentrated in fewer hands.
So we get a short term gain for the wealthy and a long term loss for the poor, under the current high population increase environment.
Yes. I think as you've said on another thread, more centres of commerce are the answer. We need to build more hubs. Then more people will embrace living farther from Sydney and Melbourne. If we can't find the will or the money to do that, then we ought to restrict immigration (or even reduce it to the extent that there are no net arrivals). But the idea of manufacturing a recession and all the social ills that accompany them — more unemployment, higher crime — stems from sadism.
Yes. I think as you've said on another thread, more centres of commerce are the answer. We need to build more hubs. Then more people will embrace living farther from Sydney and Melbourne. If we can't find the will or the money to do that, then we ought to restrict immigration (or even reduce it to the extent that there are no net arrivals). But the idea of manufacturing a recession and all the social ills that accompany them — more unemployment, higher crime — stems from sadism.
new employment hubs are excellent investment opportunities for young families willing to "rough it" and bear the risk while these areas develop and reap the gains when the hubs flourish with better employment, schooling, etc in later years..
unfortunately for cities like Perth, the state government was more interested in upgrading central Perth waterfront with amenities and ridicuous planning schemes rather than considering using these amenities and funds - perth arena for one - to create new hubs for growth... Basically puts more pressure on established high end suburb demand ( and prices ) without adding anything to engage more production.
When a reversion to mean takes place it tends to move more quickly than most expect and will often overshoot.
But I think we should be careful not to be overly dramatic about the process as that is what the FIRE sector do to resist any policy action that might be likely to limit further departures from the mean or encouragement a more gradual return to it.
It is certainly a critical part of the scare campaign against Georgist ideas.
Certainly while a reversion is moving some buyers will hold off buying but not all of them as the reversion can only be demonstrated by some buyers actually buying assets as the price falls.
Some bargain hunting buyers may be interested in waiting for the bottom but a lot of people who are interested in buying, buy when they perceive the price as being a good deal. That is why shops keep selling TV’s even though every one knows if they wait 6 months they will get a better TV for 10% less.
Plenty of people are forced by life to buy even now, many of them are likely to enter the market well before a ‘bottom’ is reached.
Most importantly, it is critical to make clear that in the event that we do see some a rapid reversion to mean in housing assets – and that seems more likely the longer the policy makers attempt to resist gravity – it is not the end of the world and a cause for panic.
A suitable bold government with a fiat currency can readily limit wider consequential damage to the economy providing it does not limit itself to the dud tools in the neo-classical debt driven tool box.
After all banking system debts are nothing more than accounting entries and accounting entries can be fixed.
The consequences of some asset prices reverting to mean can be managed with good policy by a practical government – not that we have one I will concede.
You all must live pretty privileged lives if you have not had friends or relatives who have suffered badly during this recent downturn. You act as if Australia has had everything rosy for the past few years. So many businesses have gone under retail and builders have suffered as have all our tourism based industries. House prices dropped by up to 40% in some areas, yet still you guys want people to suffer more. What is it with ya? It all sounds like you guys are hoping for some kind of ritualistic puritanical cleansing of the evils of the market by sacrificing the young at the altar of cheap houses for the rich.
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.
... the idea of manufacturing a recession and all the social ills that accompany them — more unemployment, higher crime — stems from sadism.
In this case Doc, IMO, it stems from a pretty understandable (warranted even) dissatisfaction at an entire system that has manufactured high housing prices.
Guest
30 Jul 2014, 08:06 PM
... It is certainly a critical part of the scare campaign against Georgist ideas ...
Eff Georgism - Georgists are just Socialists who have high paying jobs.
You all must live pretty privileged lives if you have not had friends or relatives who have suffered badly during this recent downturn. You act as if Australia has had everything rosy for the past few years. So many businesses have gone under retail and builders have suffered as have all our tourism based industries. House prices dropped by up to 40% in some areas, yet still you guys want people to suffer more. What is it with ya? It all sounds like you guys are hoping for some kind of ritualistic puritanical cleansing of the evils of the market by sacrificing the young at the altar of cheap houses for the rich.
The last few years have been good skamy, a walk in the park compared to what we are headed into.
The fun is only just beginning skamy.you sit there delusioned behond all hope because you just went and leveraged into more perth property
Prices and rents will be down 20% there before much longer and you will still be here preaching delusion.
It all sounds like you guys are hoping for some kind of ritualistic puritanical cleansing of the evils of the market by sacrificing the young at the altar of cheap houses for the rich.
Sounds good. Once it gets REALLY bad, the young will use their voting power to put an end to the high immigration policy that has destroyed Australia, and then the rich will be left holding a bunch of assets they can't rent and can't sell. HAHA!
The last few years have been good skamy, a walk in the park compared to what we are headed into.
The fun is only just beginning skamy.you sit there delusioned behond all hope because you just went and leveraged into more perth property
Prices and rents will be down 20% there before much longer and you will still be here preaching delusion.
Oh Ted you are the biggest drama queen on the site - always predicting doom and gloom just around the corner. Never happy when there is loads of doom and gloom.
You were sold a lemon Ted get over it, there ain't no recession coming to Australia any time soon.
That would be great!
30 Jul 2014, 11:13 PM
Sounds good. Once it gets REALLY bad, the young will use their voting power to put an end to the high immigration policy that has destroyed Australia, and then the rich will be left holding a bunch of assets they can't rent and can't sell. HAHA!
How old are you 12?
Do you seriously think you are going rally anyone to your extremist right wing red necked agenda?
People are too busy watching their asset prices rise, to be interested in your hate and your bleak dark world that you want for everyone.
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.
Mining cliff leads to falling export receipts. Worsening CAD lowers AUD. Imported goods, most notably petrol, go through the roof. Increased costs of living lead to mortgage defaults. Banks have trouble servicing offshore debt obligations with the lower AUD. Rating agencies downgrade banks. Banks’ debt servicing burden increases. Capital flights gather pace. RBA hikes interest rates to stem capital flights and dampen imports-led-inflation. More defaults. Businesses aggressively cut costs by laying off workers. Still more defaults. Banking crisis. Commonwealth unwisely attempts to bail out banks that collectively have bigger balance sheets than the GDP. Sovereign financial crisis. IMF steps in and imposes draconian austerity measures. Social unrest reaches levels not seen since 1931. ABS record shows unemployment of 45% and shortening life expectancy. Hardly a day goes by without dozens die from starvation or being killed on the streets but MSM no longer reports these events because they are no longer newsworthy. Future historians look back this era and wonder what the heck has gone wrong.
A recession is just a technical concept, the reality is that anyone on the wrong side of the housing equation IS ALREADY SUFFERING a massive recession. I bought a year ago due to spousal pressures and reckon I paid 30 to 40% more than I would have if Rudd / Swan had not intervened to “save” the housing market in the GFC. In melbourne prices went up 30% in the wake of the GFC thanks to those twats, otherwise prices would have fallen 10 to 20%. For me personally that means I now carry an additional 400k of debt than would have been required if prices were allowed to revert closer to mean. Calculate 400k * 7% (long term rates) = 28k. Add another 15k per year to pay off the 400k over the next 25 years. Thats 43k of my AFTER TAX INCOME, or around 75k of pre tax for the next 25 years. Thanks to Rudd/Swan and all the specufestors in the lib party i have been handed a 75k pay cut for the next 25 years. Thats worse than any recession I can think of.
To reiterate – govt action (or inaction) has NOT staved off a recession. It has TRANSFERRED hardship from those who MADE THE MOST out of the boom/bubble to those who did not. It has MASSIVELY reallocated wealth to those least deserving.
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