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Big four major bank economists deny the obvious housing bubble; It's not true until it's been officially denied, and now it has
Topic Started: 27 Aug 2014, 12:10 AM (7,472 Views)
Veritas
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Shadow
28 Aug 2014, 03:34 PM
It hasn't changed much for over a decade - we had this discussion a couple of weeks ago, and I posted the data proving this to be the case. The current ratio is roughly the same as it was in 2003.

The ratio did change during the late 90s and early 2000s, as a result of the financial deregulation etc that I mentioned above.

Veritas seems to think the change in the ratio as a result of that improvement in fundamentals during the 90s was excessive, so I'd like to know how much he thinks the ratio should have moved by, in response to those changes?
Answer: Not by that much.

And then there is all the other pertinent info behind your "unchanged for a decade stat"

The fact that lot sizes are smaller
The fact that FTBs are living further out
The fact that much of the growth in prices has been fuelled by investors chasing capital gains; a phenomena that increased rapidly from the mid 1990s onwards.
The fact that our banks have basically changed their whole business model by funnelling loans towards housing
The fact that the conditions of the last 10 to 15 years are extremely unlikely to be replicated over the next ten.

Etc, Etc.

BTW, look at the result of the poll from this article:http://www.watoday.com.au/business/the-economy/australias-housing-bubble-is-real-and-banks-are-to-blame-says-author-20140828-109ahx.html#poll

90% believe property is overvalued.

Time for Shadberg PR to hire more staff I reckon.

Quote:
 
The median house price to income of Sydney is nine times, compared to 6.2 times in New York and 7.3 times in London. Even Adelaide is more expensive than New York on price-to-income basis. He is particularly troubled by the surge in asset values in his Sutherland Shire neighbourhood, where land is changing hands for more than $1 million. "I have never seen so many Range Rovers in the Shire. It's a small world out there and you know they haven't become millionaires overnight. It's eerily similar to Miami [in 2005 before the sub-prime crisis]. It feels like Groundhog Day," he said.

Read more: http://www.smh.com.au/business/the-economy/australias-housing-bubble-is-real-and-banks-are-to-blame-says-author-20140828-109ahx.html#ixzz3Bf9gH4lv


Sure does :bye:
Edited by Veritas, 28 Aug 2014, 04:46 PM.
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
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Shadow
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Veritas
28 Aug 2014, 04:35 PM
Answer: Not by that much.
You've already made it clear that you don't think it should be 'that much'. My question was how much do you think would have been appropriate, given the huge improvement in fundamentals? By how much do you think the ratio should have increased? 40%? 45%? If you don't know how much the ratio should have moved by, then you can't claim the movement that did occur was too much.
Edited by Shadow, 28 Aug 2014, 04:47 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Veritas
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Shadow
28 Aug 2014, 04:47 PM
You've already made it clear that you don't think it should be 'that much'. My question was how much do you think would have been appropriate, given the huge improvement in fundamentals? By how much do you think the ratio should have increased? 40%? 45%? If you don't know how much the ratio should have moved by, then you can't claim the movement that did occur was too much.
The answer is to the question is what could be considered sustainable. You have said ad nauseaum that the price to income ratios reached in 2003 are sustainable. I disagree because such a scenario is predicated on very benign fundamentals continuing ( which they wont), monetary policy is close to exhausting its power to put a floor under prices, and I think sentiment will,, if it hasn't already, go cool on property and property investment.

Current price levels are not sustainable and will fall. By how much is hard to say and will alter from place to place.

House Prices are sticky on the way down so I expect this process to take several years ( barring a massive economic shock)

I expect FTBs in Perth (the market I'm looking at) will be paying at least 20- 25% less on average for property three years from now.

Happy now?
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
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Shadow
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Veritas
28 Aug 2014, 04:54 PM
Happy now?
No, you didn't answer the question.

By how much do you think the improvement in fundamentals during the 90s should have caused the ratio to rise?

Quote:
 
Current price levels are not sustainable and will fall
How have they been sustained for the past decade, and what do you expect will cause them to fall?

Do you expect some of the financial deregulation to be wound back? Or a substantial rise in interest rates? What is the trigger?
Edited by Shadow, 28 Aug 2014, 06:21 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Veritas
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Shadow
28 Aug 2014, 06:18 PM
No, you didn't answer the question.

By how much do you think the improvement in fundamentals during the 90s should have caused the ratio to rise?


How have they been sustained for the past decade, and what do you expect will cause them to fall?

Do you expect some of the financial deregulation to be wound back? Or a substantial rise in interest rates? What is the trigger?
Again hard to say, too may variables.

I think we are about to find out what a truly sustainable price to income ratio looks like in the Australian housing market.

Quote:
 
How have they been sustained for the past decade, and what do you expect will cause them to fall?

Do you expect some of the financial deregulation to be wound back? Or a substantial rise in interest rates? What is the trigger?


:re:


As for the rest, why do you insist on asking questions that you know the answer to?

Its very tedious.

To what gallery are you playing?

Cliff notes: Less demand, more supply.
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
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Shadow
Member Avatar
Evil Mouzealot Specufestor

Veritas
28 Aug 2014, 06:40 PM
:re:
You didn't answer the questions. Again.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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skamy
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Veritas
28 Aug 2014, 04:35 PM
Answer: Not by that much.

And then there is all the other pertinent info behind your "unchanged for a decade stat"

The fact that lot sizes are smaller
The fact that FTBs are living further out
The fact that much of the growth in prices has been fuelled by investors chasing capital gains; a phenomena that increased rapidly from the mid 1990s onwards.
The fact that our banks have basically changed their whole business model by funnelling loans towards housing
The fact that the conditions of the last 10 to 15 years are extremely unlikely to be replicated over the next ten.

Etc, Etc.

BTW, look at the result of the poll from this article:http://www.watoday.com.au/business/the-economy/australias-housing-bubble-is-real-and-banks-are-to-blame-says-author-20140828-109ahx.html#poll

90% believe property is overvalued.

Time for Shadberg PR to hire more staff I reckon.




Sure does :bye:
That newspaper article you quoted used the price income ratio for first home buyers for the London figures and I also think that it is earnings not income. The whole article is based on a miscomparison of data.
You would have thought he would have smelled a rat when he started claiming Adelaide is more expensive that New York what a total idiot.
He has virtually halved the income side by using earnings and he has reduced the median house price by only including First time buyer homes for the London figures.

Then he compares this to Australian figures which use income (often two wages) and the median house price of all houses. He raises the numerator and doubles the denominator and then pretends he is comparing like with like.


Surely you don't believe Adelaide is more expensive than New York - I have not laughed so much in ages - how can people fall for this?
Edited by skamy, 28 Aug 2014, 09:34 PM.
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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herbie
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Shadow
28 Aug 2014, 07:47 PM
You didn't answer the questions. Again.
As you don't when asked if you feel confident in stating it's the 'New Normal' mayhaps? ... :)

Or have I misunderstood? And you reckon this IS THE NEW NORMAL???

The New Normal - Hard won in the 2003 to 2008 (5 yr) run up tp the GFC; 'N the New Normal hard sustained through every bit of stimulus chucked at it from 2008 to 2014 (6 yrs) ... Could be the New Normal I guess?

Whatcha reckon Shady? "THE NEW NORMAL" or No??? ...

Pop ya cock on the block - Mouth them three little words!!! ... :)

Me; I remain hedged.
Edited by herbie, 28 Aug 2014, 09:51 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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Claw
Unregistered

Alex Barton
28 Aug 2014, 11:38 AM
Lindsay David may sound crazy ­comparing Australia’s banks to Lehman Brothers and Bernie Madoff.

But in his mind, it’s everyone else who is living in a “Disneyland” delusion by failing to spot a bank-led property bubble that shows no sign of deflating.

It’s “the sheer size of the loans relative to the incomes here” that troubles Mr David.

“No one in the Western world has ever done what we are doing.”
Lindsay David is a lazy analyst and quite frankly a pathetic researcher.

He is far too eager to write and speak, and too lazy to listen and learn.

The evidence of housing shortages and its causes is easy to find for any genuine researcher with an Internet connection.

Real estate agents tell him there is a land shortage in the Northern Territory. There is. There is a shortage of land WITH PERMISSION TO BUILD A HOUSE ON in the Northern Territory. The shortage is not in square metres of land. The shortage is in permission to build.

If Lazy Lindsay compared the price of a large plot of land with permission to build one house against the price of a small plot of land with permission to build several houses, then he could easily see where the cost (and shortage) lies.

No, instead of some actual analysis that requires a simple calculation and a tiny bit of brain power, his case appears to be based on “Oh people said there was a shortage in XXX, later prices fell in XXX, therefore if people say there is a shortage here, prices must fall here soon and there can’t be a shortage”.

Smug know-it-alls like Lindsay have been assuring young Australians for years that there is no need to build housing, improve transport, or decentralise workplaces since sufficient housing with good transport to workplaces already exists. Young Australians continue to suffer high rents and outrageous commutes and the mythical abundance of housing somehow never finds its way to those who need it. Lindsay David appears blind to this suffering yet his “research” has determined that the shortage is a myth. How so?

I have come to realise that people like Lindsay David are a far more dangerous enemy to Australians seeking shelter than are the actual NIMBYs, council planners, immigration boosters, and credit-pushers who create the shortage and high prices. At least they can be easily seen as biased and talking their book. Lindsay David, as a apparently unbiased researcher, legitimises the shortage-creating activity and places all the blame elsewhere.

Researcher – no. Shortage-denying parrot – yes.
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Bardon
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Guest
28 Aug 2014, 01:48 PM


The internet is taking hold in China and the workers will no longer tolerate seeing obscene wealth juxtaposed with their own meagre standard of living. HK, Canada, Singapore and the US have all legislated to discourage the influx of the parties member's 4 trillion dollars of wealth.

That just leaves Australia and England. Watch this space....
So are your really sure that six countries is all that counts?

How has the US legislated against Chinese real estate investment?
Edited by Bardon, 30 Aug 2014, 02:08 AM.
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