Why the offensive remarks? I think you may have the wrong opinion of me.
I don’t disagree with much of what you say above but you are making some fundamental mistakes.
Sorry but the amount that people have borrowed has changed over the decades. The average mortgage is bigger, personal debt is significantly higher and your own chart shows that the percentage of disposable income spent on interest varies considerably over time. Why do you post a chart showing that it has changed then continue to insist that it hasn’t? I don’t get it.
I do apologise if you are offended - the debate on here gets quite vigorous. I am actually one of the politer posters or I least I think I am.
However, Wisebear on the credit boom stuff, the argument that a boom in credit fueled the large house price rises we witnessed before 2003 just does not pass muster.
People borrow much the same today relative to income and interest rates as they have for decades. This is a fundamental misunderstanding that was also common in the mid 1990s and early 1980s as we emerged from those downturns. You can see by my signature quote and it only takes a few google searches to find more of this self same misunderstanding during these periods where folk had lost confidence in property as an investment mechanism.
People thought as you do back then. They thought that those crises were caused by debt levels getting too high. They were wrong as decades of further growth in credit and debt has proved.
The reason I spend so much time explaining this is that these furphys distract from the main problem and that is how we as a society are providing homes for the future generations. Australia traditionally has done this well, as our longstanding 70% home ownership figures attest.
Shadow
9 Aug 2013, 12:16 PM
I've been listening to these gloomster predictions for nearly seven years now and still no sign of 'The Bubble' popping. For nearly seven years they've been telling me house prices are at the peak and can't get any higher. Yet house prices just keep rising.
Supply and demand.
I remember thinking like that in the early 90's. We looked at a house on the sea front down at Tamarama it was $400k. I absolutely refused to let my husband buy it as I thought the price was ridiculously overinflated. We were freshly stung by the huge price drops on our house in the UK and really did think the property market was down and out for the count and would never be the same again.
Less than 10 yrs later that property sold for $6m.
That was my lesson learned -to never ever underestimate what folk can and will pay for prime property.
Soul Torpor
9 Aug 2013, 01:00 PM
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.
Hello torrid soul,
Don't you get tired of abusing old ducks like me on anonymous internet sites?
I personally suffered greatly during the 90's and I have many family and friends suffering now in Ireland.
You are the one who has no understanding of this pain and no understanding of cui bono from a downturn as you naively celebrate every piece of bad news that hits our economy in your desperate hope that we too will suffer the fate of the Irish.
Grow up and lose the tortured soul image - surely you are not a angst filled teenager anymore.
BTW, I am having absolutely no difficulties with my mortgages, and neither do most Australians. We are on average(I am obviously a lot more than this, being an old duck and all) 2 years ahead and new loan holders are only paying on average 20% of their income on their mortagages.
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.
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.
This thread is about supply and demand. I'm addressing the demand part and state that high houses are primarily the result of low interest rates and easy credit. No other factor has been mentioned by me because some/most don't accept the above.
Quote:
Are there any other factors, what are they?
Do you really not know? There are loads but I'm not going to list them all. Why don't you list them and I'll tell you if I agree.
Quote:
You might want to pay some attention.
Attention to what?
Quote:
I can see it's hard for you to think about anything but credit.
Yes, I go to sleep at night and dream about credit too
Quote:
So let's start with - is cheap credit an underlying factor in demand or enabler of demand?
Well it depends exactly what you mean by "underlying factor" but I don't want to do a Shadow and obfuscate the issue so for the sake of keeping the debate alive I'll say it's an enabler.
So, the primary reason we have high house prices is because low interest rates and easy credit has enabled people bid more. Are we in agreement now?
skamy
9 Aug 2013, 02:35 PM
I do apologise if you are offended - the debate on here gets quite vigorous. I am actually one of the politer posters or I least I think I am.
However, Wisebear on the credit boom stuff, the argument that a boom in credit fueled the large house price rises we witnessed before 2003 just does not pass muster.
People borrow much the same today relative to income and interest rates as they have for decades. This is a fundamental misunderstanding that was also common in the mid 1990s and early 1980s as we emerged from those downturns. You can see by my signature quote and it only takes a few google searches to find more of this self same misunderstanding during these periods where folk had lost confidence in property as an investment mechanism.
People thought as you do back then. They thought that those crises were caused by debt levels getting too high. They were wrong as decades of further growth in credit and debt has proved.
The reason I spend so much time explaining this is that these furphys distract from the main problem and that is how we as a society are providing homes for the future generations. Australia traditionally has done this well, as our longstanding 70% home ownership figures attest.
Hey Skamy, no need to apologise, I never get offended on interent forums.
Well needless to say, I disagree but I'm happy to discuss later, perhaps on a new thread?
You believe (correct me if I am wrong) that easy access to credit in itself forces up house prices and is the major issue, whilst we believe that if demand is greater than supply, that forces up prices and is the major issue, and in the absence of that higher demand prices would be largely unaffected by a greater supply of credit.
Any expressed market opinion is my own and is not to be taken as financial advice
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
+1 -1[/quote]Correct.
And from that I am sure you will have the good grace to accept the following:
In the case of the Australian housing market cheap credit did inflate demand to a point where demand exceeded supply which contributed to a significant inflation in price.
And I would add, based on the data:
As the prices increased, more investors, enabled by the cheap credit, entered the market adding further inflationary pressure both as a function of their presence in the market and due to the fact that they were doing little for the supply side by buying new rather than established builds
These are the facts gents. Ignore them at your peril.
Quote:
Hello torrid soul,
Don't you get tired of abusing old ducks like me on anonymous internet sites?
I personally suffered greatly during the 90's and I have many family and friends suffering now in Ireland.
You are the one who has no understanding of this pain and no understanding of cui bono from a downturn as you naively celebrate every piece of bad news that hits our economy in your desperate hope that we too will suffer the fate of the Irish.
Grow up and lose the tortured soul image - surely you are not a angst filled teenager anymore.
BTW, I am having absolutely no difficulties with my mortgages, and neither do most Australians. We are on average(I am obviously a lot more than this, being an old duck and all) 2 years ahead and new loan holders are only paying on average 20% of their income on their mortagages.
Skamy, does the fact that more and more posters consider you an insufferable dope give you any pause for thought that you are actually full of shit?
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
So, the primary reason we have high house prices is because low interest rates and easy credit has enabled people bid more. Are we in agreement now?
I think the primary reason for high house prices (if you consider present prices high) is the increasing demand for houses coupled with the increasing cost of supply (which includes taxes which were not previously levied).
Skamy, does the fact that more and more posters consider you an insufferable dope give you any pause for thought that you are actually full of shit?
You and a few thickos on here just don't seem to get how lovely I am. Most posters love having an old biddy like me around.
I suspect it is something to do with you and your mates constant looking on the dark side of life. You probably find it very difficult to be happy with anything.
So don' t worry my little friend I do not take your bad manners to heart.
Just an aside - are you so uptight in your real life - you always take everything too seriously and never ever lighten up. I pity your poor mates that have bought homes that you were telling us about the other day. Those poor folk having to put up with your sanctimonious preaching down the pub.
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.
I think the primary reason for high house prices (if you consider present prices high) is the increasing demand for houses coupled with the increasing cost of supply (which includes taxes which were not previously levied).
Yes, I think most on here have already worked that out.
The debate is about whether easy credit and low interest rates were a primary factor in enabling the demand that caused the housing bubble.
So, the primary reason we have high house prices is because low interest rates and easy credit has enabled people bid more. Are we in agreement now?
I think the primary reason for high house prices (if you consider present prices high) is the increasing demand for houses coupled with the increasing cost of supply (which includes taxes which were not previously levied).
Absolutely, the developer contributions plus the 10% GST loaded on in 2000 have made a huge difference to the cost of housing.
It all seemed so simple when they said "let the developer pay for the local infrastructure costs"
Wisebear
9 Aug 2013, 03:56 PM
The debate is about whether easy credit and low interest rates were a primary factor in enabling the demand that caused the housing bubble.
You are changing from the primary factor to a primary factor.
'Wise Bear' was first here two years ago telling us all about 'The Bubble' and how it was going to pop and how we were all wrong and all idiots for not seeing the 'risks' and 'threats' that he saw. And here we are two years later with house prices at new record highs and still rising, and Wise Bear still convinced he is right and hurling abuse and telling us we're all idiots.
I wonder if Wise Bear (under a different name) was one of the bears telling me in 2007 on GHPC about 'The Bubble' and how it was going to pop.
I've been listening to these gloomster predictions for nearly seven years now and still no sign of 'The Bubble' popping. For nearly seven years they've been telling me house prices are at the peak and can't get any higher. Yet house prices just keep rising.
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