And all the houses around Australia would be uniformly high
That's another important point. There is reasonable priced housing in this country. We bought a shitbox in melbourne in 2003 for 220k. It was the absolute cheapest freestanding we could find in the worst possible area. Yellow bottled glass windows with cracked plaster everywhere
There are homes in melbourne today for under 300k - ten years later
Someone buying a shitter in melbourne today has a better wage to price ratio than ten years ago let alone repayment requirement.
APF - a place where serious people don't take themselves too seriously. There's nothing else like it.
Its such a basic concept its amazing people can get it so wrong. Prices of any good (in a market where the government doesn't set the price) is ALWAYS determined by demand and supply. No ifs or buts.
Things like easy credit can facilitate an increase in demand but is not a driver of higher prices Likewise, spam about buying viagra online might have facilitated an increase in demand for it but it did not drive the prices higher.
The key still comes down to insufficient supply in areas where people want to live and that's what caused prices to move up.
There are many things which can facilitate increased demand, like lower interest rates, government incentives, increasing rents, etc But none of them can drive up prices unless supply was restricted. Credit for TVs and cars are also easy to obtain nowadays but you don't see their prices climbing over the long term
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
Things like easy credit can facilitate an increase in demand but is not a driver of higher prices Likewise, spam about buying viagra online might have facilitated an increase in demand for it but it did not drive the prices higher.
WTF?
Of course it increases prices. If demand rises quicker than the supply side can respond prices rises.
That is exactly what happens in credit fuelled housing booms and exactly what happened in Australia.
Governments and banks have spent much of the last decade making sure that the prices stay at those elevated levels.
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
They do not want to own and run public housing. Peter
Huh?
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 is it: a) demand rising quicker than supply side can respond b) credit c) or government and banks
which is causing prices to rise?
Its demand and supply every time. The other 2 merely facilitates changes in demand (or in the instance of the government, supply as well)
The government does not want to house people, it does not want to run mental institutions either. If someone can get a cheap "relatively" house to live in, then they do not have to try, they could even feign a mental illness and get put in an asylum. Russia tried this and it failed completely. The people have to try, they have to fight to get that house. If it is to easy who would work??? Most people would just sit at home and sip tea and watch t.v. So i think we need to look at the system as an engineered product that will keep the monkeys working. Not sitting around playing games. And eating peanuts and banana's. Housing is a very regulated product. Very. Peter from Perth
so is it: a) demand rising quicker than supply side can respond b) credit c) or government and banks
which is causing prices to rise?
Its demand and supply every time. The other 2 merely facilitates changes in demand (or in the instance of the government, supply as well)
Housing is inelastic. The simple fact is that supply could not keep up with the massive (credit borne) infusion on the demand side. Therefore, prices boomed.
Economics 101.
And that view is held by AHURI
Quote:
House prices have risen because finance was deregulated in the late 1980s but planning was not. Prior to 1986, both housing finance and land were rationed through government controls, maintaining a balance, but after 1990, finance steadily expanded while land use controls continued to remain tight and taxes on new housing increased making new housing both less profitable and less available. The lack of any real taxation on owner occupation also has led to over-consumption and to speculative activity taking the form of ever-rising prices.” (AHURI 2010)
And the RBA, who thought, in 2006 anyway, that there was no way that supply could have kept up with demand and prevented massive inflation.
Quote:
In addition, the cumulative price growth in the recent upswing has been much less there than for some fast-growing cities where sprawl has occurred, such as Las Vegas and Phoenix. This example is not intended as a substitute for a thorough econometric investigation, which is beyond the scope of this paper.17 Nonetheless, the facts suggest that allowing for more spread out cities or, more generally, untrammelled supply of extra dwellings, would not have prevented a large increase in Australian housing prices over the past decade.
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
Housing is inelastic. The simple fact is that supply could not keep up with the massive (credit borne) infusion on the demand side. Therefore, prices boomed.
Economics 101.
And that view is held by AHURI
And the RBA, who thought, in 2006 anyway, that there was no way that supply could have kept up with demand and prevented massive inflation.
They have banks as Sydney, why didn't it happen there?
Edit: actually I just checked and Broken Hill is up over 100% over the past 10 years - median price now $115k. Still, why is it so low compared to the capital cities?
Housing is inelastic. The simple fact is that supply could not keep up with the massive (credit borne) infusion on the demand side. Therefore, prices boomed.
Economics 101.
Bingo. Prices rise due to the demand and supply curve.
There are an incredible amount of factors which influence supply and there are also incredible amount of factors which influence demand of which you merely highlighted one (it is not even the main one as regardless of availability of credit, if there was no confidence the economy and people are losing their jobs en masse, very little people will buy and prices will not go up)
As many have (correctly) said, it all comes down to demand and supply.
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