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Supply and demand. Sorry to repeat myself.
Topic Started: 4 Aug 2013, 11:13 AM (17,713 Views)
Wisebear
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mel
8 Aug 2013, 10:40 AM
If that were true we would have a huge pile of empty home sitting around. I agree cheap credit has the effect of inflating prices of existing stock though.
Why?
Trojan
8 Aug 2013, 11:23 AM
mel
8 Aug 2013, 10:40 AM
If that were true we would have a huge pile of empty home sitting around. I agree cheap credit has the effect of inflating prices of existing stock though.
And all the houses around Australia would be uniformly high
Why?
Edited by Wisebear, 8 Aug 2013, 02:27 PM.
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mel
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Wisebear
8 Aug 2013, 02:26 PM
Why?

Why?
you said

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.


i said
Quote:
 
If that were true we would have a huge pile of empty home sitting around. I agree cheap credit has the effect of inflating prices of existing stock though.


If low rates are a primary driver of demand for housing construction, where are all the empty houses? Our cash rate has fallen by almost 5% in recent years.

Edited by mel, 8 Aug 2013, 02:43 PM.
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Trojan
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Wisebear
8 Aug 2013, 02:26 PM
Why?
That's what happens when demand and supply is not part of the equation and only credit availability is the determining factor in house prices.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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Wisebear
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Trojan
8 Aug 2013, 02:34 PM
Wisebear
8 Aug 2013, 02:26 PM
Why?
That's what happens when demand and supply is not part of the equation and only credit availability is the determining factor in house prices.
But supply and demand ARE a part of the equation.

Why do you think they're not?
mel
8 Aug 2013, 02:33 PM

If low rates are a primary driver of demand for housing, where are all the empty houses
There won't be any.

Why do you think cheap easy credit will cause empty houses?
Edited by Wisebear, 8 Aug 2013, 02:38 PM.
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mel
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Wisebear
8 Aug 2013, 02:37 PM
But supply and demand ARE a part of the equation.

Why do you think they're not?

There won't be any.

Why do you think cheap easy credit will cause empty houses?
i don't think that at all - i was asking where all the empty homes are if production is driven mainly by cheap credit.
Edited by mel, 8 Aug 2013, 02:41 PM.
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Wisebear
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mel
8 Aug 2013, 02:40 PM
i don't think that at all - i was asking where all the empty homes are if production is driven mainly by cheap credit.


I'm not sure what you're saying here you seem to be contradicting yourself.

Property prices are excessively high because of cheap and easy credit. There is no reason to believe that this will lead to empty properties. Please explain your logic.

Edited by Wisebear, 8 Aug 2013, 02:52 PM.
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mel
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your exact words were:

Quote:
 
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 are talking about the primary driver for demand of houses, correct?

im taking it as demand for housing = demand for housing construction... or are we talking about two different things? :D

or are you talking purely about price?
Edited by mel, 8 Aug 2013, 02:58 PM.
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Wisebear
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mel
8 Aug 2013, 02:54 PM
You are talking about the primary driver for demand of houses, correct?

im taking it as demand for housing = demand for housing construction... or are we talking about two different things? :D

or are you talking purely about price?
I wasn't referring to production just price so that explains the confusion.

Easy, cheap credit wouldn't necessarily create a supply glut either, as I believe ou're suggesting, because the price of land rises as property prices rise so there's no"super-profit" and no significant rush to build.
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miw
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Veritas
8 Aug 2013, 01:48 PM
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.
Common sense 101 will tell you that demand is driven by increase in the number of people needing housing, not by credit booms.

Supply could have kept up with demand, except that a combination of soaring costs of new builds (early 2000s) and lack of credit for developers (since 2008) has suppressed the supply response to date. I think we are about to see some supply response in the next 12-18 months that will keep some kind of a lid on price rises though. Perhaps not in Sydney.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Wisebear
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miw
8 Aug 2013, 03:12 PM
Common sense 101 will tell you that demand is driven by increase in the number of people needing housing, not by credit booms.
Totally wrong.

Economic demand refers to people with available funds who bid on property. It doesn’t matter how many people “need” somewhere to live if they haven’t got the funds.
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