Martin North is usually a bearish commentator, however he does compile some interesting data.
I think that he makes some good points. 70% is certainly a majority of people and if they are out there spending then there is a flow on effect for everyone. There is no benefit for most people when house prices are falling.
I thought that the other good point was when he said that house have now become commoditised and they probably won't ever return to just being places to live in. They have become an investment class.
Problem is, he is wrong. Many home owners do not want higher prices as they realise it makes life harder for their children and others children.
How in the fuck does a seemingly uneducated moron get to a point where he can write a piece of toilet paper like this and have it published anywhere.
It totally loses the point that the 'extra wealth' derived is based purely on the speculation in housing, that beautiful thing called 'equity mate'. The products that are purchased with equity, like cars and holidays etc and what do you think a $20k holiday will cost after 30yrs of interest added onto it. Sure the car dealerships/travel agents and their employees all get a short term benefit but it's all based on one thing, rising house prices.
I know no one wants to hear it but when you get your minds around how our entire economy is using housing as a life support system you will will start to understand the peri less situation we could potentially be in if the status quo doesn't remain.
The only winner is the banks, full stop anyone who argues any differently is just brain dead.
How in the fuck does a seemingly uneducated moron get to a point where he can write a piece of toilet paper like this and have it published anywhere.
It totally loses the point that the 'extra wealth' derived is based purely on the speculation in housing, that beautiful thing called 'equity mate'. The products that are purchased with equity, like cars and holidays etc and what do you think a $20k holiday will cost after 30yrs of interest added onto it. Sure the car dealerships/travel agents and their employees all get a short term benefit but it's all based on one thing, rising house prices.
I know no one wants to hear it but when you get your minds around how our entire economy is using housing as a life support system you will will start to understand the peri less situation we could potentially be in if the status quo doesn't remain.
The only winner is the banks, full stop anyone who argues any differently is just brain dead.
This raises an interesting point: is the ability to secure borrowing against property a good thing? For some people (like me) it's fantastic, but if you don't have the financial sense to use it properly I suspect you could get yourself into a good deal of trouble (and plenty do).
Martin North is usually a bearish commentator, however he does compile some interesting data.
I think that he makes some good points. 70% is certainly a majority of people and if they are out there spending then there is a flow on effect for everyone. There is no benefit for most people when house prices are falling.
I thought that the other good point was when he said that house have now become commoditised and they probably won't ever return to just being places to live in. They have become an investment class.
70% of people do not own property.
70% of homes are owned. Big difference.
How many times?
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
This raises an interesting point: is the ability to secure borrowing against property a good thing? For some people (like me) it's fantastic, but if you don't have the financial sense to use it properly I suspect you could get yourself into a good deal of trouble (and plenty do).
And unfortunately you are a rarity Stinkbug, and for those like yourself who tap into it knowing the implications of doing so I have no qualms with. My gripe is with the potentially millions of home owners who get approached by the bank in times like this with offers of $10's of dollars of home loan 'equity' and without forethought or true understanding of the implications just jump in and like magic the new Audi's in the driveway.
I had a 30 something at work buy a new top of the range Mazda suv and stated she put it on the mortgage, a mortgage she has had for 3 yrs and thats after the bank facted in her $11k credit card debt.
Without the 'equity' I would bet my last dollar she would not qualify for a standard car loan for a car half the price. Anecdotally I see the system is very broken.
My gripe is with the potentially millions of home owners who get approached by the bank in times like this with offers of $10's of dollars of home loan 'equity' and without forethought or true understanding of the implications just jump in and like magic the new Audi's in the driveway.
However, let’s think about who benefits from high and rising prices. First anyone who currently holds property (and that is two-thirds of all households in Australia) will like the on-paper capital gains. This flows through to becoming an important element in building future wealth.
The implication here is that capital gains are not zero sum. Does anyone have an argument that it is not the case? The capital gain for the seller is a capital loss for the buyer. The seller's profit is the buyer's loss. The only way this is sustainable is if incomes rise at the same speed as house prices, but that would be very inflationary, and the seller's capital gain would be eroded by inflation. We have had an unusual situation for 20 years where incomes rose because the participation rate rose, rather than wages. That has run it's course now.
Quote:
But underlying all this, we have moved away from seeing housing as something which provides shelter and somewhere to live; to seeing it as just another investment asset class.
This way madness lies.
Quote:
This is probably an irreversible process, and part of the “financialisation” of society, given the perceived benefits to the economy and households, but we question whether the consequences are fully understood.
This process has reversed many times in history, and never pleasantly.
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