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Supply and demand. Sorry to repeat myself.
Topic Started: 4 Aug 2013, 11:13 AM (17,705 Views)
Wisebear
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Shadow
9 Aug 2013, 10:46 AM
So banks are giving everyone $2m at 0.1% fixed for 20 years?
It's what's called a thought experient where you change one variable at a time.

Your claim is:
Quote:
 
unless demand exceeds supply, all the 'easy credit' in the world won't cause people to bid up prices.


so let's test that: let's say banks were to offer $2m mortages to anyone that wants one at , say, 0.1% fixed for 20 years.
Why do you think people won't borrow this money and bid up prices?


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barns
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Wisebear
9 Aug 2013, 10:58 AM
It's what's called a thought experient where you change one variable at a time.

Your claim is:


so let's test that: let's say banks were to offer $2m mortages to anyone that wants one at , say, 0.1% fixed for 20 years.
Why do you think people won't borrow this money and bid up prices?

In desirable suburbs where demand exceeds supply, yes you are correct.

In undesirable locations where supply exceeds or meets demand, incorrect.

Money (including debt) is just the tool to facilitate the buyer/seller match.

Availability of debt on the supply side (to developers) has the potential to keep a lid on prices. Maybe State governments should introduce First Developer Grants.
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
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Shadow
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Evil Mouzealot Specufestor

Wisebear
9 Aug 2013, 10:58 AM
so let's test that: let's say banks were to offer $2m mortages to anyone that wants one at , say, 0.1% fixed for 20 years.
Why do you think people won't borrow this money and bid up prices?

It would depend on supply.

If supply exceeded demand, people would not bid up the price of houses.

If demand exceeded supply, people would bid up the price of houses.
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.
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Foxy
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Zero is coming...

barns
9 Aug 2013, 08:05 AM
Veritas. I have a straight forward question for you.

Price of median house in Broken Hill is $115k. Price of median house in Sydney is 6x that. Why?

They have the same banks, interest rates and build costs.
Supply and demand
Peter from Perth
p.s. no one forces these people to buy in Sydney, simple.
If you are a drinker and you go to the bottle shop, no one one says hey you can only buy expensive Margaret River wine.
You can't buy goon today sir.
Cut the suit to fit the cloth.
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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Strindberg
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Veritas
9 Aug 2013, 12:41 AM
Natural demand caused by demographics was turbocharged by falling interest rates and banks who, all over the English speaking world, decided to liberalize their lending practices.

This is not opinion. It is fact.
That is not fact. It is false.

Interest rates were continuously raised in Australia from 2001 to 2008.

05-Dec-2001 --0.25 4.25
08-May-2002 +0.25 4.50
05-Jun-2002 +0.25 4.75
05-Nov-2003 +0.25 5.00
03-Dec-2003 +0.25 5.25
02-Mar-2005 +0.25 5.50
03-May-2006 +0.25 5.75
02-Aug-2006 +0.25 6.00
08-Nov-2006 +0.25 6.25
08-Aug-2007 +0.25 6.50
07-Nov-2007 +0.25 6.75
06-Feb-2008 +0.25 7.00
05-Mar-2008 +0.25 7.25

Interest rates in 2008 were higher than at any time since 1992 (apart from a two month period in 1994).

It is absolutely false to claim that demand was caused by falling interests rates.
Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
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Wisebear
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You'll have to explain this to me.

You claimed that:
Quote:
 
...the banks have been lending the same relative to income for decades.


BUT your chart shows payments varying between 18% and 32% of disposable income. How is this the same?


It looks to me like the amount lent varies with interest rates which is exactly my point.
Edited by Wisebear, 9 Aug 2013, 11:10 AM.
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Foxy
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Zero is coming...

Wisebear
9 Aug 2013, 10:58 AM
It's what's called a thought experient where you change one variable at a time.

Your claim is:


so let's test that: let's say banks were to offer $2m mortages to anyone that wants one at , say, 0.1% fixed for 20 years.
Why do you think people won't borrow this money and bid up prices?

Hey take it one step further, 0% interest rates.
You could borrow all the money in the world.
Peter from Perth
Then just borrow more each year to live.
And NEVER pay it back.
:ni:
And it would not be called bank robbing.
I would borrow 1,000 trillion dollars and employ the whole of the world to build a huge pyramid in the middle of Australia. :huh:
Wisebear
9 Aug 2013, 11:09 AM
You'll have to explain this to me.

You claimed that:


BUT your chart shows payments varying between 18% and 32% of disposable income. How is this the same?


It looks to me like the amount lent varies with interest rates which is exactly my point.
Borrowed money can be like drugs are to junkies.
There is a level that has to be maintained.
Peter
Edited by Foxy, 9 Aug 2013, 11:14 AM.
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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Wisebear
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Shadow
9 Aug 2013, 11:05 AM
It would depend on supply.

If supply exceeded demand, people would not bid up the price of houses.

If demand exceeded supply, people would bid up the price of houses.
But when you create massive amounts of cheap credit demand does exceed supply.

Look I get it. You made a dumb statement that you can't defend and now you need to try and save face by including near infinite supply. No problem.

Maybe next time you will think before saying silly things and you wont continuously lose debates.
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Shadow
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Evil Mouzealot Specufestor

Wisebear
9 Aug 2013, 11:18 AM
Look I get it. You made a dumb statement that you can't defend and now you need to try and save face by including near infinite supply. No problem.

Maybe next time you will think before saying silly things and you wont continuously lose debates.
Why all the abuse? You sound rattled...

Quote:
 
But when you create massive amounts of cheap credit demand does exceed supply.
No, demand only exceeds supply if demand exceeds supply.

For example, in Japan there is a declining population and therefore supply is always exceeding demand. It doesn't matter how much cheap credit you throw at Japanese people (and credit is very very cheap there). They aren't bidding up the price of homes because there are more homes than people need.

Yes, cheap credit will increase demand, but if it doesn't increase demand to a level that exceeds supply, then people are not going to bid up prices.

No need for all the abuse Wisebear... just slow down and think about it properly. Ask yourself why people are not bidding up the price of houses in places where there is ample supply and little demand, like Japan, or Detroit. Credit is very free and easy in Detroit. Are they bidding up the price of houses there? No. Because there is not enough demand regardless of how much credit you throw at people.
Edited by Shadow, 9 Aug 2013, 11:30 AM.
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.
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Wisebear
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foxbat101
9 Aug 2013, 11:12 AM
I would borrow 1,000 trillion dollars and employ the whole of the world to build a huge pyramid in the middle of Australia. :huh:


Thank you. Even in jest you prove my point.


Quote:
 
Borrowed money can be like drugs are to junkies.

I know. Tell that to the bulls they struggle with this concept.

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