Welcome Guest [Log In] [Register]


Reply
Economic Multiplier Effect of Housing - $1 spent on construction generates $3 in general economy
Topic Started: 3 Aug 2013, 11:34 AM (11,497 Views)
Veritas
Default APF Avatar


According to the Property Industry its the biggest Employer in WA

http://www.propertyoz.com.au/Article/NewsDetail.aspx?id=5555

Quote:
 
The property industry is the largest employer in Western Australia and its contribution to the state’s economic growth is second only to the resources sector, according to a landmark study by the Property Council of Australia.


In the lead-up to the state Budget the Property Council commissioned the AEC Group to compile the report, The Economic Significance of the Property Industry to the WA Economy.


“We commissioned the report to help our campaign for more infrastructure investment to support the growth of our cities and towns, and to get a better return from the huge amount of taxes paid by the property sector”, said Property Council Executive Director Joe Lenzo.

The key findings of the report were:
The property industry is the largest employer in WA, employing over 200,000 people;
The property industry contributes the most taxes in WA, $2.7 billion in 2009-10; and
Property is the second largest industry in WA, 12% of the state economy;

Edited by Veritas, 29 Aug 2014, 05:38 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
Profile "REPLY WITH QUOTE" Go to top
 
Shadow
Member Avatar
Evil Mouzealot Specufestor

Veritas
29 Aug 2014, 05:34 PM
The property industry is the largest employer in WA, employing over 200,000 people
Population of WA is 2.6 million, so that's less than 8% of the population.
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.
Profile "REPLY WITH QUOTE" Go to top
 
Veritas
Default APF Avatar


Please note also that the total number of people working directly in construction doesn't have to be that high.

Here are the stats for Ireland:

http://www.irisheconomy.ie/Crisis/KellyCrisis.pdf

Quote:
 
Construction: rise in employment from 165,000 in 2000 to 280,000
in 2008 (10% of employment to 13%). 85% Irish
.


You have to then count in all the people indirectly employed in the whole racket:

-RE Agents
-Bunning's Employees
- Vendors of outdoor furniture
-Furniture outlets
- White goods vendors

Etc, Etc
Shadow
29 Aug 2014, 05:42 PM
Population of WA is 2.6 million, so that's less than 8% of the population.
First of all, I don't even know whether the stat checks out.

Unlike yourself, I take what the property industry puts out in terms of data with a pinch of salt.

Secondly, 8% is a lot.

As you will no doubt be aware, the difference between an unemployment rate of 5% and 10% is huge in terms of demand in the real economy.
Edited by Veritas, 29 Aug 2014, 05:45 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
Profile "REPLY WITH QUOTE" Go to top
 
Shadow
Member Avatar
Evil Mouzealot Specufestor

Veritas
29 Aug 2014, 05:43 PM
I don't even know whether the stat checks out.
Perhaps you should have included that disclaimer when you posted the figures.
Veritas
29 Aug 2014, 05:43 PM
8% is a lot
It's way too small to validate Jimbo's claim that building houses is a Ponzi scheme.
Edited by Shadow, 29 Aug 2014, 05:48 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.
Profile "REPLY WITH QUOTE" Go to top
 
skamy
Member Avatar


Jimbo
29 Aug 2014, 04:38 PM
It is. If you employ someone to build a house and they use their wages to obtain a loan to a buy a house and that creates demand for more workers to build more houses for more workers, it's a bloody Ponzi scheme.
So if I employ a farm laborour to plant a new crop and he buys my produce with his wages and creates demand it is a ponzi?

Jimbo this is a ridiculous logic used by the doom and gloom brigade.

Building, buying and selling property is NOT a ponzi, people buy a place of shelter with a distinct utility value. In a ponzi they buy a promise of profit which is paid for only by the next person buying the same promise.

There is no promise of gain in property, lots of people buy new property that deteriorates in value if not maintained, look at most of those houses for sale in your area of Warnbro people lost money and people can now buy them at below replacement value.

If you buy property and wish to see gains then you either have to renovate, or invest in an area with growth potential, whether that be population (Melbourne) or wealth (Darwin) or is undervalued for some other reason eg the GFC.



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.
Profile "REPLY WITH QUOTE" Go to top
 
Veritas
Default APF Avatar


Quote:
 
Perhaps you should have included that disclaimer when you posted the figures.


I just did. Besides, Ill leave it up to others to judge. The link posted will take them through to the report.

Quote:
 
It's way too small to validate Jimbo's claim that building houses is a Ponzi scheme.
Veritas Please note also that the total number of people working directly in construction doesn't have to be that high.



Jimbo is talking about a "multiplier accelerator process". Ostensibly, this involves economic activity being generated in a closed loop. For example, one section of the community is earning their income building houses and the market for those houses is other people who, either directly or indirectly, make their income building houses.

And yes, we can measure the propensity for this to exist by how diversified the labour market is. The data I just showed shows that in Ireland 13% of the population were, at the height of the bubble directly employed in construction. That means that 87% of the population weren't.

However, as we know, once the bubble popped the only think stopping unemployment rising above its 15% high water mark was mass emigration.
skamy
29 Aug 2014, 05:49 PM
So if I employ a farm laborour to plant a new crop and he buys my produce with his wages and creates demand it is a ponzi?

Jimbo this is a ridiculous logic used by the doom and gloom brigade.

Building, buying and selling property is NOT a ponzi, people buy a place of shelter with a distinct utility value. In a ponzi they buy a promise of profit which is paid for only by the next person buying the same promise.

There is no promise of gain in property, lots of people buy new property that deteriorates in value if not maintained, look at most of those houses for sale in your area of Warnbro people lost money and people can now buy them at below replacement value.

If you buy property and wish to see gains then you either have to renovate, or invest in an area with growth potential, whether that be population (Melbourne) or wealth (Darwin) or is undervalued for some other reason eg the GFC.


Tell us what a PONZI is then genius instead of torturing us with ignorance of basic economics day in day out.
Edited by Veritas, 29 Aug 2014, 05:58 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
Profile "REPLY WITH QUOTE" Go to top
 
Shadow
Member Avatar
Evil Mouzealot Specufestor

Veritas
29 Aug 2014, 05:57 PM
Jimbo is talking about a "multiplier accelerator process". Ostensibly, this involves economic activity being generated in a closed loop. For example, one section of the community is earning their income building houses and the market for those houses is other people who, either directly or indirectly, make their income building houses.

And yes, we can measure the propensity for this to exist by how diversified the labour market is. The data I just showed shows that in Ireland 13% of the population were, at the height of the bubble directly employed in construction. That means that 87% of the population weren't.

However, as we know, once the bubble popped the only think stopping unemployment rising above its 15% high water mark was mass emigration.
A bubble is not the same as a Ponzi scheme. I was addressing Jimbo's claim that building houses is a Ponzi scheme.

Veritas
29 Aug 2014, 05:57 PM
Tell us what a PONZI is then genius instead of torturing us with ignorance of basic economics day in day out.
Ponzi or pyramid schemes are fraudulent investments that pay return to investors from money paid by subsequent investors, rather than from the sale of, or return from any tangible product.

The property market can not be considered a Ponzi or pyramid scheme for the following reasons.

1. It is not fraudulent. There is nothing illegal or fraudulent about the purchase of property for shelter or investment.

2. Return is paid to investors from rental income as well as capital gain.

3. New money flows into the property market on a constant basis, not only from new investors, but also from the rental income and regular wage income of existing property owners.

4. Property is a real and tangible asset, providing essential shelter to millions of people.
Edited by Shadow, 29 Aug 2014, 06:07 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.
Profile "REPLY WITH QUOTE" Go to top
 
Veritas
Default APF Avatar


Shadow
29 Aug 2014, 06:04 PM
A bubble is not the same as a Ponzi scheme. I was addressing Jimbo's claim that building houses is a Ponzi scheme.
Nah, I reckon at the heart of any bubble is a Ponzi scheme.

How do Ponzi's collapse? No new entrants and/or a surge in existing participants looking to take profit at the same time.

Pretty much the same as bubbles then.

Naturally, housing construction in of itself is not a Ponzi scheme. Increased rates of housing construction, however, should be indicative of growth in other parts of the economy. It serves the economy. Housing is infrastructure. Nothing more.

If it could be used as an off the shelf stimulus tool ( as the title of this thread suggests) then the solution to the crash in Ireland, Spain and California ought to have been, build more houses.

But it clearly wasn't.
Shadow
29 Aug 2014, 06:04 PM
A bubble is not the same as a Ponzi scheme. I was addressing Jimbo's claim that building houses is a Ponzi scheme.


Ponzi or pyramid schemes are fraudulent investments that pay return to investors from money paid by subsequent investors, rather than from the sale of, or return from any tangible product.

The property market can not be considered a Ponzi or pyramid scheme for the following reasons.

1. It is not fraudulent. There is nothing illegal or fraudulent about the purchase of property for shelter or investment.

2. Return is paid to investors from rental income as well as capital gain.

3. New money flows into the property market on a constant basis, not only from new investors, but also from the rental income and regular wage income of existing property owners.

4. Property is a real and tangible asset, providing essential shelter to millions of people.
Why do you wheel out this "legality" red herring every time?

What does it matter?

Of course it can be considered a Ponzi scheme:

If a market develops to the point that prices can only sustained through the belief that prices will rise further and that belief keeps existing players invested and new players buying in then it is the hallmark of a Ponzi scheme.

Essentially, all Ponzi schemes have on thing in common : existing prices can only be sustained by new entrants to the market and any profits that existing investors have is entirely dependant on new entrants.

In this way, housing markets which have experience very high rates of price inflation over a very short time period bear the hallmarks of Ponzi schemes.

Was the Irish housing market a Ponzi scheme. You bet. Earlier investors, in may cases, made out like bandits while the "greater fools" got incinerated.

Again, this is what always happens when Ponzis collapse.

If it walks like a duck and quacks like a duck....
Edited by Veritas, 29 Aug 2014, 06:17 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
Profile "REPLY WITH QUOTE" Go to top
 
Shadow
Member Avatar
Evil Mouzealot Specufestor

Veritas
29 Aug 2014, 06:11 PM
Nah, I reckon at the heart of any bubble is a Ponzi scheme.
I disagree with that statement, but even if the statement were true, it still doesn't say a bubble is the same as a Ponzi scheme.

For example, seeds are at the heart of every apple, but an apple is not the same as a seed.
Veritas
29 Aug 2014, 06:11 PM
Why do you wheel out this "legality" red herring every time?
It's not a red herring. Ponzi scheme are, by definition, illegal.

Quote:
 
Of course it can be considered a Ponzi scheme
Only if you invent your own private definition for 'Ponzi scheme'.

Quote:
 
If a market develops to the point that prices can only sustained through the belief that prices will rise further and that belief keeps existing players invested and new players buying in then it is the hallmark of a Ponzi scheme
Given that pretty much every central bank in the world targets a positive inflation rate of around 2% per annum, nearly every single product sold on the planet is a Ponzi scheme by your definition, because prices for everything will rise over time.

Quote:
 
Essentially, all Ponzi schemes have on thing in common : existing prices can only be sustained by new entrants to the market and any profits that existing investors have is entirely dependant on new entrants
That describes every housing market in the world. And just about every market outside housing too. All markets require new entrants in order to grow and be sustainable.

Quote:
 
Was the Irish housing market a Ponzi scheme. You bet.
No, it was a bubble.

Quote:
 
If it walks like a duck and quacks like a duck
But since it doesn't...
Edited by Shadow, 29 Aug 2014, 06:26 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.
Profile "REPLY WITH QUOTE" Go to top
 
Veritas
Default APF Avatar


Shadow
29 Aug 2014, 06:18 PM
I disagree with that statement, but even if the statement were true, it still doesn't say a bubble is the same as a Ponzi scheme.

For example, seeds are at the heart of every apple, but an apple is not the same as a seed.
Perhaps next time you will read the rest of the post before turning your mind to fruit.
Groan.

Right, you think that Ponzi schemes have to be illegal before they can be considered Ponzi schemes?

Tell me, before Ponzi schemes were made illegal, were there Ponzi schemes?

Anyway, said my piece you are just going to do that thing were you pretend you have forgotten how to comprehend the English language and ask 15 questions.

See ya :bye:
Edited by Veritas, 29 Aug 2014, 06:44 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
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
Go to Next Page
« Previous Topic · Australian Property Forum · Next Topic »
Reply



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy