Then you are having comprehension difficulties.... What do you think he meant then by "take the punch bowl away and see how the market performs"??
Apologies. I didt see his first comment.
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
Sydney ABS house price index Dec 2007 103.1 Dec 2008 98.9 Change -1.79%
Right - so after 5 years or constantly RISING interest rates and house prices (2003 - early 2008) - especially in parts of Australia other than Sydney (which peaked earlier, and was more impacted by the dot com crash etc), prices finally fell less than 2%, as interest rates peaked at a level 250% of the current setting..... and we are supposed to buy the argument that as soon as interest rates rise again from here property will suddenly collapse?? Highly unlikely based on recent historical context is all I am saying, as you have just shown.....
Right - so after 5 years or constantly RISING interest rates and house prices (2003 - early 2008) - especially in parts of Australia other than Sydney (which peaked earlier, and was more impacted by the dot com crash etc), prices finally fell less than 2%, as interest rates peaked at a level 250% of the current setting..... and we are supposed to buy the argument that as soon as interest rates rise again from here property will suddenly collapse?? Highly unlikely based on recent historical context is all I am saying, as you have just shown.....
Catweasel say it astonishing.
Common narratives among a mouse tribes have barely a changed since a 2008.
Beliefs are so the embedded, it the psychographic phenomenon.
Did they??? So you are claiming clearance rates and prices fell nationally from 2003 through 2007 when the RBA was raising rates the whole time? Are you sure about that?
I was not talking about 2003 to 2007, you moron. I said the PREVIOUS hiking cycle. That was in 2010. The LAST time the RBA raised rates, dwelling prices and clearance rates fell in response. The same thing will happen next time. We have in recent years reached a point where interest rates are the prime mover because of affordability constraints. Yes, I know going back over history you can show that rates and dwelling prices could rise at the same time. It's my belief that those days are behind us. A lot of would-be FHB can only enter the market now if rates keep making new lows.
I was not talking about 2003 to 2007, you moron. I said the PREVIOUS hiking cycle. That was in 2010. The LAST time the RBA raised rates, dwelling prices and clearance rates fell in response. The same thing will happen next time. We have in recent years reached a point where interest rates are the prime mover because of affordability constraints. Yes, I know going back over history you can show that rates and dwelling prices could rise at the same time. It's my belief that those days are behind us. A lot of would-be FHB can only enter the market now if rates keep making new lows.
You are wriggling and discrediting yourself. You wrote:
Quote:
Yes, the period of independence and inflation targeting is the relevant one.
Now to support your "take away the punchbowl" remark you want to select just one of the rate increase periods, ignore the rest, and use the single one you chose as support for your remark.
There have been FOUR rate rise cycles since 1993 - the period you say is "the relevant one". House prices rose during (and following) three of those periods yet you choose to adopt the fourth as indicative of what will happen in future.
You are wriggling and discrediting yourself. You wrote:
Now to support your "take away the punchbowl" remark you want to select just one of the rate increase periods, ignore the rest, and use the single one you chose as support for your remark.
There have been FOUR rate rise cycles since 1993 - the period you say is "the relevant one". House prices rose during three of those periods yet you choose to adopt the fourth as indicative of what will happen.
No, you're merging two of my comments. The first comment was a reply to the suggestion that mortgage rates are not at historic lows. I dispute that. Over the inflation-targeting era, interest rates are extremely low.
Separately, it's my view that given the affordability constraints that didn't exist in 1993 but do exist today, and the extremely high level of household leverage, house prices and interest rates will not rise simultaneously for the foreseeable future. I suspect that any new rate rise cycle will be a replay of 2010 with prices and clearance rates falling.
The last time that money market interest rates were at current levels was 53 years ago. In March 1960 the minimum interest rate applied on loans accepted by authorised dealers on the short term money market was 2.69% with the maximum rate of 3.38% and an implied weighted average rate of 2.70%.
Certainly very low interest rates were common through the 1940s, 1950s and most of the 1960s. For instance in 1952, the 3-month commercial bank deposit rate was just 0.71 per cent and even in 1956 it had lifted to only 1.25%. Housing loan rates held at 5.00% through 1959 and 1960. Trading bank overdraft rates were between 5.00-6.00% in the late 1950s/early 1960s.
All these gems of information are contained in the hardcopy Reserve Bank Statistical Bulletins of the era and the forerunner – the Commonwealth Bank of Australia Statistical Bulletins.
Of course a key reason why interest rates were low was because wages and prices were under control. In the 1958/59 year, wages rose by 2.5%, retail prices rose by 2.6% and the consumer price index rose by 1.9%.
Do these growth rates seem familiar? Wages are growing by 3.4% currently with inflation around 2.5%. Certainly other indicators are a bit different with the economy growing 7% in 1958/59, but slowing to 4.4% in 1959/60. And unemployment was hovering near 1-2% in the late 1950s/early 1960s.
So could a cash rate near 3.0% become the ‘new black’? If inflation sticks near 2.5% and if Aussies continue to apply a conservative approach to taking on debt, a new economic glory period could be ushered in, similar to that which existed in the 1950s.
When determining what 'normal' interest rates are it's probably not reasonable to look at the last 100+ years. There have been too many structural changes in the last few decades. Independent RBA, inflation targeting RBA, financial deregulation and perhaps even the rise of dual income families & recognition of women's income.
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