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Supply and demand. Sorry to repeat myself.
Topic Started: 4 Aug 2013, 11:13 AM (17,702 Views)
Veritas
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Frank Castle
9 Aug 2013, 12:15 PM
Get involved in a proper way or fck off.
Perhaps you'd like to take your own advice and answer this previously ignored question

[/quote]Delighted Frank.

It is blindingly obvious that demand for housing will not be uniform in all of the countries many sub markets.

For example, not as many people want to buy houses in Broken Hill as Sydney. What is more, people who work in broken hill are likely to earn less than people who live in Sydney in many cases.

These factors explain why house prices are lower.

Happy?

EDit: One would also assume that supply side constraints in many parts of Australia ( usually the less desirable areas) are less than they are in, say, our capital cities where the work and amenitis are and where the majority of people want to live.
Simon
9 Aug 2013, 12:35 PM
Veritas
9 Aug 2013, 12:31 PM
Man, Ive been with you all the way here.

But the arch bulls here never give an inch.
your the only one with him, there's 10+ against you and they're not all bulls
Well simon, maybe for once you might have a go at explaining where I have gone wrong.

And don't do a Skamy and pretend I said something else.

Look at what I have written and puch holes in it.

Ready when you are chief.
Edited by Veritas, 9 Aug 2013, 12:40 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
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John Frum
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Quote:
 
Let me try to explain to you how the market works.


Please don't.

You mention a handful of people who've made squillions out of property yet you seem to be blissfully unaware of the pain that collapsing property prices have caused to people in several countries over the last 5 years, as if some how the sub prime and GFC never happened in your magic world of clever speculators.

You're a myopic old fool that spits venom on an anonymous internet forum to quell the fear you have over your exposure to property prices.



"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness.
"Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
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Wisebear
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zaph
9 Aug 2013, 12:34 PM
You either believe credit is the only factor in house prices or you have done a poor job in explaining yourself.


Where did I say credit was the only factor? My position is that the Australian housing bubble that has developed over the past, say, 15 years is primarily the result of low interest rates and easy credit. The market on average and markets regionally are of course subject to many other influences. Thanks for paying attention.


Quote:
 
Do you mean in isolation/all other things being equal then cheap credit will drive up house prices?

I can see this is hard for you so let’s go with that for starters.
Now, what affect does demand have on prices?
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barns
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zaph
9 Aug 2013, 12:13 PM
Did you mean supply in your ps?

If so, I totally agree with that.
Yes sorry - fixed it.
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
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Wisebear
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Veritas
9 Aug 2013, 12:31 PM
Wisebear
9 Aug 2013, 12:28 PM
zaph
9 Aug 2013, 12:02 PM
In other words cheap credit is an enabler for demand...
Good, you’re slowly getting there.
Now, what affect does demand have on prices?
Go on, you’re almost there.
Man, Ive been with you all the way here.

But the arch bulls here never give an inch.

All is as it should be and anyone who says otherwise is whinger/lazy/doomer etc etc
I can’t even see that I’m being that controversial here. Most of what I’m saying is accepted economics and wouldn’t be questioned by the mainstream.

Zaph is struggling with the concept that increased demand leads to price rises.
Peter thinks economic text books are wrong because they don’t agree with him.
Shadow doesn’t believe that any amount of super cheap credit will add to demand.

I ask you, what is wrong with these people? They all seem to live in some weird bubble world were economic realities don’t apply to them.

Easy credit leads to more demand which leads to higher prices. Wow, I’m such a doomer.
Edited by Wisebear, 9 Aug 2013, 01:29 PM.
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barns
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Veritas
9 Aug 2013, 12:37 PM
Delighted Frank.

It is blindingly obvious that demand for housing will not be uniform in all of the countries many sub markets.

For example, not as many people want to buy houses in Broken Hill as Sydney. What is more, people who work in broken hill are likely to earn less than people who live in Sydney in many cases.

These factors explain why house prices are lower.

Happy?

EDit: One would also assume that supply side constraints in many parts of Australia ( usually the less desirable areas) are less than they are in, say, our capital cities where the work and amenitis are and where the majority of people want to live.

Ok so you're saying that the primary determining factors for house prices is desirability of location, ability of 'locals' to pay and number of 'locals'?
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
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Veritas
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barns
9 Aug 2013, 01:27 PM
Veritas
9 Aug 2013, 12:37 PM
Delighted Frank.

It is blindingly obvious that demand for housing will not be uniform in all of the countries many sub markets.

For example, not as many people want to buy houses in Broken Hill as Sydney. What is more, people who work in broken hill are likely to earn less than people who live in Sydney in many cases.

These factors explain why house prices are lower.

Happy?

EDit: One would also assume that supply side constraints in many parts of Australia ( usually the less desirable areas) are less than they are in, say, our capital cities where the work and amenitis are and where the majority of people want to live.

Ok so you're saying that the primary determining factors for house prices is desirability of location, ability of 'locals' to pay and number of 'locals'?
I'm saying what I have already said three or four times now.

Demand, in the face of inelastic supply, e.g. the Sydney housing market, is enabled/increased/boosted by the availability of credit at any given time.

When demand outstrips supply (as has happened in Australia again this was only possible through a massive expansion of credit into the system) prices rise.

In some parts of the country, the inflationary effect has been less because they are places with less of a supply/demand mismatch.

Simples!

And remember investors amplify this inflationary effect ( beyond those buying houses to live in) by adding to demand without actually creating any more of it.

They almost all buy established.
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
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Foxy
Member Avatar
Zero is coming...

skamy
9 Aug 2013, 11:34 AM
Let me try to explain to you how the market works.

Paddington was once the domain of Irish navy workers they could all afford house there by borrowing what they could on their wages.

All the doctors and lawyers and bank executives had better houses in the city.

Now the city grew and more doctors and lawyers and bank executives came and there were no house left in the city so they started to bid up the Paddington prices and the Irish navies moved on down the line. The cost of land and a new home provides the floor to a normal market.


This is the way house prices grow and this has happened for 100s of years. It has nothing to do with permitted borrowing capacity (which has not changed for decades) or even wages growth it is to do with an increase in the number of people on good wages and not enough supply of the homes they desire.


This is from John Jacob Astor from the late 1880's who made his fortune from real estate:

Buy on the fringe and wait. Buy land near a growing city! Buy real estate when other people want to sell. Hold what you buy!”

Do you seriously think a credit boom was what made his profits grow, what about these guys from the same period, all those fortunes made through property did they have a huge credit boom back then?


Every person who invests in well-selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent, for real estate is the basis of wealth.”
-Theodore Roosevelt

“Buying real estate is not only the best way, the quickest way, the safest way, but the only way to become wealthy.”
-Marshall Field

Ninety percent of all millionaires become so through owning real estate.
-Andrew Carnegie

The major fortunes in America have been made in land.
-John D. Rockefeller

If you want to grow into your username you need to wipe that doomer shit from your eyes.
Totally agree,
Peter from Perth
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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zaph
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Wisebear
9 Aug 2013, 01:04 PM
My position is that the Australian housing bubble that has developed over the past, say, 15 years is primarily the result of low interest rates and easy credit. The market on average and markets regionally are of course subject to many other influences. Thanks for paying attention.



Quote:
 
Where did I say credit was the only factor?


I haven't followed this thread from the start so I don't know. But those posts I've read of yours in this thread only mention credit.

Are there any other factors, what are they?

You might want to pay some attention.

Quote:
 
I can see this is hard for you so let’s go with that for starters.
Now, what affect does demand have on prices?


I can see it's hard for you to think about anything but credit. So let's start with - is cheap credit an underlying factor in demand or enabler of demand?
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mel
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Wisebear
8 Aug 2013, 10:36 AM
You also need to understand where demand comes from.

Demand for property is not just a function of people numbers, location and jobs.

The primary driver since the great Australian housing bubble began has been easy credit and excessively low interest rates. So if you want to understand demand then understand why credit is easy and cheap and understand under what circumstances this could change.

You should also learn this very important lesson from history; things do change.
bump for Zaph - probably worth reading the entire thread imho
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Edited by mel, 9 Aug 2013, 02:16 PM.
APF - a place where serious people don't take themselves too seriously. There's nothing else like it.
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