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Who can we find to blame for the Australian housing bubble?
Topic Started: 9 Sep 2014, 09:28 PM (664 Views)
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http://www.afr.com/p/business/property/prosper_says_easy_credit_soft_taxes_ZYGVdsOWLdFW8d4xzuQLkO

Prosper says easy credit, soft taxes fuel house bubble

Australia is facing a ‘land bubble’ driven by cheap debt and a tax system that encourages property speculation, lobby group Prosper Australia has warned a senate inquiry into housing affordability.

Prosper called on the inquiry to “critically reconsider” any “simple” claims that high housing prices are the result of a housing shortage. “If we are faced with a genuine mismatch between supply and demand, rents would have risen dramatically,” its ­submission said.

“They have not, except for a short period between 2007 and 2010. A solitary focus upon supply and demand is a convenient distraction from the twin determinants of land market bubbles: liberal lending standards and non-taxation of land.”

The current tax regime – low property and land taxes and inefficient stamp duties – encourages land-owners to extract an economic rent from their property by capturing the uplift in land values, it said…

“Investors perceive rental income as secondary to expected rises in capital prices, while first home buyers over-leverage themselves to enter a bubble-inflated market.”
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Claw
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Prosper are a bunch of prize arseholes for denying the shortage in such a fashion.

Take the example of Sydney a house that used to rent for 1/3 a normal wage in the 1970′s and was affordable to say a schoolteacher with a stay-at-home wife, now rents for 1/2 an ordinary wage and is unattainable to the schoolteacher unless the wife also works. That is the dramatic rise that Prosper denies.

An increase from 1/3 wage to 1/2 a wage is a HUGE increase. This is a 50% increase. And it is a 50% increase on a family’s largest expense. Ordinary families simply cannot afford to pay this much extra rent.

In response families of ordinary means have been forced to compromise on size, quality, backyards and on commuting time and/or send the wife to work. In other words the family cannot afford to pay $800 per week for a house like their parents had, so they rent a unit for 40% of a wage, or rent a house with no backyard for say $500 per week AND commute much further paying more in petrol.

Shortage-deniers like Prosper do no wish to see the dramatic rise in rents for what was once a ordinary home. Since there is a shortage of these ordinary homes, the market rations them by forcing price up beyond what ordinary families will pay. A simple cottage on 1/4 acre 20kms from the CBD is no longer ordinary. Due to shortage of such it is now considered a luxury.

Ordinary families now are forced to pay a higher rent + higher commuting costs for a dwelling with less utility than previous generations had.

Supply shortage – tick.
Higher price – tick.
Less for same price – tick.
Dramatic rise in rents – tick.
Shortage-denial – tick.
Prosper wrong – tick.
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Guest
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Oh dear, another "why can't I buy a house just like mum and dad's while still keeping wifey at home" moan.

It's time to realise that a one-income household is no longer the average income if most others are two-income households. Be realistic about your place in the household income distribution. And that home of your parents wasn't in a flash neighborhood when they bought it. Most first-home buyers have had to buy a below-average property on the fridge. It was always thus, but now the fringe is further out because the cities are bigger (partly because of the ridiculous insistence on 1100 m2 of land for a small cottage.). Also, first homes in decades past were nowhere near as nice or large as the ones people aspire to now. Or are you planning to buy a three-bedroom fibro with a septic tank on an unmade road?

I can't help suspecting that a lot of bears are just under skilled men aggrieved that their wife are earning more than they are. Why is it important for you to have a stay-at-home wife?
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Count du Monet
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The real culprit is an inflationary and easy money. Inflation destroys the value of bank savings and bonds. Hence people put their money into property as inflation proof savings. It's that simple.

Removing NG would make little difference. It might lower prices but would also increase rents and simply mean private investors are replaced by companies.

The media is looking in all the wrong places. The elephant in the room is the banking system.
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!!!

Don't be SAUCY with me Bernaisse
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Santamaria
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Quote:
 
Who can we find to blame for the Australian housing bubble?
I blame Steve Keen. If that idiot hadn't spent so much time screeching in 2008 then KRudd and RBA wouldn't have panicked and slashed rates and pumped the first home grant then the market would have corrected and we wouldn't be in this mess. So ironically the biggest critic of the bubble is the person who perpetuated it!
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Less Keen
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Santamaria
10 Sep 2014, 04:02 PM
I blame Steve Keen. If that idiot hadn't spent so much time screeching in 2008 then KRudd and RBA wouldn't have panicked and slashed rates and pumped the first home grant then the market would have corrected and we wouldn't be in this mess. So ironically the biggest critic of the bubble is the person who perpetuated it!
There is a lot to blame Steve Keen for, but sparking a panic among policymakers is not one of them.

You are presuming that the relevant policymakers believed Keen's 40% crash and acted on it. I do not think there is any evidence of this. The RBAs published forecasts were a lot more negative than what actually happened (unemployment to 8% instead of the 5.something it got to in that period) and they reacted to that. Nothing in the government or RBA statements at the time suggested they believed a housing crash would happen, probably because they realised China was ok, the $A had fallen and the stimulus would help.
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Bardon
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10 Sep 2014, 03:43 PM

I can't help suspecting that a lot of bears are just under skilled men aggrieved that their wife are earning more than they are. Why is it important for you to have a stay-at-home wife?
Maybe they need her living in the inner city and close by so that they can nip home at lunchtime for a bit of tiffin?
Count du Monet
10 Sep 2014, 04:00 PM
The real culprit is an inflationary and easy money. Inflation destroys the value of bank savings and bonds. Hence people put their money into property as inflation proof savings. It's that simple.

Absolutely and then there is price and rent growth on top of that.
Edited by Bardon, 11 Sep 2014, 10:17 AM.
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Ex BP Golly
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10 Sep 2014, 03:43 PM
Oh dear, another "why can't I buy a house just like mum and dad's while still keeping wifey at home" moan.

It's time to realise that a one-income household is no longer the average income if most others are two-income households. Be realistic about your place in the household income distribution. And that home of your parents wasn't in a flash neighborhood when they bought it. Most first-home buyers have had to buy a below-average property on the fridge. It was always thus, but now the fringe is further out because the cities are bigger (partly because of the ridiculous insistence on 1100 m2 of land for a small cottage.). Also, first homes in decades past were nowhere near as nice or large as the ones people aspire to now. Or are you planning to buy a three-bedroom fibro with a septic tank on an unmade road?

I can't help suspecting that a lot of bears are just under skilled men aggrieved that their wife are earning more than they are. Why is it important for you to have a stay-at-home wife?
Thats right.

Not only shouldnt the wife get equal pay; her labour should be for absolutly no material gain whatsoever.

Why cant people understand that simple premise?

Your wife is there to be fd.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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