Leith van Onselen arrogantly and falsely claims as "MY HYPOTHESIS"; The theory that downsizing baby boomers will have a negative effect on house prices
Tweet Topic Started: 24 May 2012, 11:17 AM (5,604 Views)
A hypothesis, in a scientific sense, does not have to be original. It is the starting point for a test. Saying my hypothesis doesn't mean I am claiming it to be an original hypothesis. It is all semantics anyway, but if you think that saying my hypothesis means it is original then you are wrong.
I have a HSc and for the example F=ma (dont put the 'x' in) you write something like 'Hypothesis: to prove F=ma' as its a well known theory. 'My' indicates ownership and is a big thing in the science world. Ownership = recognition = $$$ or the other end of things ownership = proven wrong = ridiculed.
If you were unaware of the theory and wrote 'My' instead that would be acceptable too. But then you can simply acknowledge that it is not yours if you find out it has already been proven. In any case this isn't a peer reviewed journal/paper so I wouldn't get too beat up about it. The OP isn't claiming it to be his own is he?
For what it's worth, it does not matter whose hypothesis it is, the argument is total crap.
Owner occupying BB's are neither net sellers or net buyers as they approach retirement.
I can also put forward a case apartment prices are about to skyrocket because of the huge demand created by BB's when downsizing. But of course this is nonsense too since I am only looking at one side of the equation (same as Macrobusiness and whoever else wahts to claim the hypothesis).
What will actually happen greater density of dwellings in urban locations as BB's seek to live near essential services in retirement (ie: more building on less land). This means land productivity will increase, increasing land values - all other things being equal (ie: population growth)
In short, if you want to buy residential property, the demographics are supportive of land rich properties located in and around infill location (ie: houses close to the city).
For what it's worth, it does not matter whose hypothesis it is, the argument is total crap.
Owner occupying BB's are neither net sellers or net buyers as they approach retirement.
I can also put forward a case apartment prices are about to skyrocket because of the huge demand created by BB's when downsizing. But of course this is nonsense too since I am only looking at one side of the equation (same as Macrobusiness and whoever else wahts to claim the hypothesis).
What will actually happen greater density of dwellings in urban locations as BB's seek to live near essential services in retirement (ie: more building on less land). This means land productivity will increase, increasing land values - all other things being equal (ie: population growth)
In short, if you want to buy residential property, the demographics are supportive of land rich properties located in and around infill location (ie: houses close to the city).
I was always led to believe that the BB generation was like a basketball passing through a hose, which led everyone to believe that the following generations were smaller, and an aged population pyramid would show a distinct bulge for the boomers followed by a "waist" as a smaller generation followed, however that isn't what the population pyramid looks like at all. It's almost drum or barrel shaped - the following generations are just as large, so as boomers move to smaller dwellings, the space left will be filled entirely by the following numbers IMHO.
We will face a huge demand on our aged care resources, palliative care etc, but housing just shouldn't be affected in the way that Leith believes - I just don't see a sudden massive oversupply occuring.
But you should really focus on playing the 'game' and not the 'man', I would really like your opinion on the topic, and not grammar and punctuation?
Fair enough but it's important to be aware of the past form of an author when considering his offerings.
With regard to the issue of boomers' actions (downsizing or selling IPs) leading to house price falls it's a furphy based on a false premise. As Peter Fraser has pointed out, the boomers are actually being replaced by more numerous groups. Each single age group between the ages ~20 to ~50 is actually greater than each of the single age groups over ~50. Both of the hypotheses cited by LVO are based on the false premise there there is an upside down population pyramid. This is a popular myth. The key to housing requirements is the net household formation rate. Australia's population demographics, as shown by the pyramid below, mean that household formations in the coming years will far exceed household cessations. As each year passes, the number of households will increase. Any reduction in boomer requirements will be more than compensated by new household formation among the following larger demographic groups - however these are defined. People like LVO write on this subject as if we have an inverted population pyramid with the boomer population, on a per age basis, outnumbering the following generation and boomers will leave a surplus of properties behind them. That is false. Another aspect is that people like LVO write as if there is some sudden demographic change about to be unleashed. Again, this is false. Demographic changes are gradual and actions such as downsizing and selling IPs are happening all the time. Many boomers have already retired. I'm a boomer who has downsized and I retired in 1994. There is nothing especially different, demographically, about the next 5-10 years compared with the past 5-10 years. The effect of future actions of boomers will be similar to the effect of past actions by similar people like myself. The stuff of this issue is just a part of an increasingly desperate search and justification for a belief in future lower house prices. It's just one of many dreamt up crutches to justify a hope. We've had all sorts of reasons postulated as to why house prices will fall including such daft stuff as climate change, Israel bombing Iran and peak oil. Actually, to be truthful, I enjoy house price forums for the amusement I get from all these crackpot ideas. It's particularly amusing that LVO is claiming this particular crackpot hypothesis as his own. I've been mocking it since 2004 on house price fora.
For what it's worth, it does not matter whose hypothesis it is, the argument is total crap.
Owner occupying BB's are neither net sellers or net buyers as they approach retirement.
I can also put forward a case apartment prices are about to skyrocket because of the huge demand created by BB's when downsizing. But of course this is nonsense too since I am only looking at one side of the equation (same as Macrobusiness and whoever else wahts to claim the hypothesis).
What will actually happen greater density of dwellings in urban locations as BB's seek to live near essential services in retirement (ie: more building on less land). This means land productivity will increase, increasing land values - all other things being equal (ie: population growth)
In short, if you want to buy residential property, the demographics are supportive of land rich properties located in and around infill location (ie: houses close to the city).
I was always led to believe that the BB generation was like a basketball passing through a hose, which led everyone to believe that the following generations were smaller, and an aged population pyramid would show a distinct bulge for the boomers followed by a "waist" as a smaller generation followed, however that isn't what the population pyramid looks like at all. It's almost drum or barrel shaped - the following generations are just as large, so as boomers move to smaller dwellings, the space left will be filled entirely by the following numbers IMHO.
We will face a huge demand on our aged care resources, palliative care etc, but housing just shouldn't be affected in the way that Leith believes - I just don't see a sudden massive oversupply occuring.
I agree - the starting point is "will Australia's population be bigger or smaller in the future".
If it is bigger (which is almost certain), then the BB thesis falls apart.
Yes that is what I think too. There may be some runctions on a local level as boomers look to retire to other areas than the inner/middle suburbs that they now occupy, but on a national level, the transition should be smooth.
I tried to point that out to Leith on his thread yesterday, but he wouldn't have a bar of it. Unless he knows something that I don't, then I just don't see it. Bernard Salt doesn't help either with his ideas.
So who want's to own this theory? We can auction it.
Any expressed market opinion is my own and is not to be taken as financial advice
>>We will face a huge demand on our aged care resources, palliative care etc, but housing just shouldn't be affected in the way that Leith believes - I just don't see a sudden massive oversupply occuring.
A beginning point however is that the huge cost of health care as money spent has also helped inflate prices of everything we buy, where in former years you could reasonably expect to inherit your parents house and know you yourself can have debts you can justify because of that
The future though seems more about selling the parents house to pay for the health care that has driven up house prices and where user pays will be the name of the game for many other services.
Health care costs are surely just part of the bubble where a generation or two of people have moved thru the system with the idea things are indefinitely sustainable and the idea you can get affordable heart bypass surgery and total rework of arteries in your legs and arms is kind of taken for granted.
The whole deal of the GFC is that we are in multiple bubbles that are unsustainable.
From the point of view of Australia you might think you are not in a bubble but you are also in the unsustainable bubble of the USA health cost spending and to a lessor extent UK and European health cost spending, which then leads to bubbles in just about everything else too since the sums spent are so large.
So far the main aim of policy in the world has been to spend our way out of the problems caused by the bubble. Few people seem to really grasp what we are facing. Instead they think it is just Greece spain italy france the UK etc and maybe parts of the USA and so forth.
I was always led to believe that the BB generation was like a basketball passing through a hose, which led everyone to believe that the following generations were smaller, and an aged population pyramid would show a distinct bulge for the boomers followed by a "waist" as a smaller generation followed, however that isn't what the population pyramid looks like at all. It's almost drum or barrel shaped - the following generations are just as large, so as boomers move to smaller dwellings, the space left will be filled entirely by the following numbers IMHO.
We will face a huge demand on our aged care resources, palliative care etc, but housing just shouldn't be affected in the way that Leith believes - I just don't see a sudden massive oversupply occuring.
the discussion of boomers selling property to fund retirement sort of assumes a homogeneous nature of bb's, that at 3pm on the 3rd of January 2013 every boomer will place every property they own on the market, leading to crash. it just aint so.
the BB generation has an 18 year span. They will sell off property to fund their retirement over a long period = no BB induced crash.
Yes that is what I think too. There may be some runctions on a local level as boomers look to retire to other areas than the inner/middle suburbs that they now occupy, but on a national level, the transition should be smooth.
I tried to point that out to Leith on his thread yesterday, but he wouldn't have a bar of it. Unless he knows something that I don't, then I just don't see it. Bernard Salt doesn't help either with his ideas.
So who want's to own this theory? We can auction it.
The BB generation isn't--and doesn't need to be--bigger than subsequent generations, in order for its retirement phase to have significant economic effect.
What matters is that the BB generation is significantly bigger than the pre-WWII generation which preceded it, and enjoys considerably longer life expectancy.
In their peak earning years (roughly ages 35-55) the BBs brought a sustained surge of overall income growth to fuel the economy in general. Combined with a secular stepchange in consumer credit availability and cost, residential real estate values duly exploded during BB peak earning years.
The Gen X and Gen Y cohorts have brought similar absolute population increases into the economy, but in rate-of-growth terms, their relative growth impact--by mathematic necessity--will be less than that of the BBs.
Meanwhile, the BBs, after bringing outsized growth compared to prior generations, are now on the cusp of imposing outsized retirement cost growth on their children. BB retirement will on average be far longer in duration than before, more medically intensive than before, and overall more expensive than before. Their retirement income entitlements, particularly in the public sector, are typically "defined-benefit" instead of "self-funded", and the actuarial foundations for the longterm payout of these are questionable in many cases.
Meanwhile, BBs who have not fully participated in the workforce (whether due to gender bias, personal misfortune, or personal choice) during the golden years of defined benefit retirement plans, seem likely to become longterm and demanding claimants to public pension, subsidy, and medical entitlements, in numbers never before seen.
the discussion of boomers selling property to fund retirement sort of assumes a homogeneous nature of bb's, that at 3pm on the 3rd of January 2013 every boomer will place every property they own on the market, leading to crash. it just aint so.
the BB generation has an 18 year span. They will sell off property to fund their retirement over a long period = no BB induced crash.
I agree with the BIS (Bank of International Settlements, not the BIS Shrapnel spruikers). They described demographic pressures from the Boomer retirement as a "headwind"--likely to be a steady but low-key brake on growth in RE values.
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