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.
Bullshit.
The demand for housing is very inelastic wrt price. It's not like shoes where ladies will buy as many as they can afford. If you halved the price of accommodation, you would have some effect from people spreading out into smaller households, and some more people would buy holiday homes (which is why the market in places like the Gold Coast behaves so differently) but the vast majority of people would continue to live in about the same sized house and perhaps buy another car. Likewise, if you increased the cost of accommodation, the demand for iphones would drop and if things got bad enough, perhaps even food.
In the absence of welfare support things would be different. You'd have a lot more people forced into caravans at the bottom of the scale.
What you have is a very flat demand curve and a supply curve that is pretty flat until you hit a critical price value and then it gets quite steep. It's just not like manufactured goods.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
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.
Bullshit.
Quote:
Common sense 101 will tell you that demand is driven by increase in the number of people needing housing, not by credit booms.
Your comment above is simply wrong.
Why the rant about inelasticity? It's irreleavnt to the point in question.
Totally agree. The people lending the (banks) money are anticipating demand. In other words the banks see Western Australia is entering a time of prosperity. They then agree that they will lend into that market, in this case the Perth real estate market. So People start buying houses and paying more than the last person. Prices start to rise. More money is injected into the Perth market, prices rise and so the cycle continues. As more people feed into the market, prices continue to rise and the banks keep lending. Supply and demand all the way up and all the way down. But as i say remember we live in one of the most sparsely populated counties on earth, and building cost in real terms are lower than ever. Peter from Perth
Not a debate, but I was also in Thurso Scotland a couple of years ago
Quite a nice place to be honest, but too far away from anywhere.
If I recall, John O'Groats (the most notherly point in Britain) is only a few miles up the road.
Why the rant about inelasticity? It's irreleavnt to the point in question.
Totally relevant.
The fact is the price can move up and down a lot without appreciably changing the demand. If the price goes down I don't live in two houses. If the price goes up I have to suck it up and make savings elsewhere.
Sure there are demand adjustments around the edges when prices change, but by far the biggest factor in demand is the number of people.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
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.
You just cant admit it can you?
You just cant accept the key determinant of house prices on the demand side is credit availability. Even when I show you that AHURI and the RBA agree.
ITS A LEVERAGED BUY!!!
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.
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.
Common mistake.
You are confusing demand based on demographics with actual demand.
Its actual demand (the people willing and able to pay the price) that matters when it comes to house prices.
The rest will rent or emigrate or sleep in tents or whatever.
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
You just cant accept the key determinant of house prices on the demand side is credit availability. Even when I show you that AHURI and the RBA agree.
ITS A LEVERAGED BUY!!!
Sounds like you are now changing your tune and more correct now. At least you now acknowledge credit availability merely adds to the demand side of the demand and supply chart.
And your AHURI quote stated it quite well.
"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.” (AHURI 2010)
Finance deregulation increased demand while land use controls and tax kept supply constrained.
Its actual demand (the people willing and able to pay the price) that matters when it comes to house prices.
The rest will rent or emigrate or sleep in tents or whatever.
So you are trying to say that renting does not constitute demand for accommodation? I would say it is just a different way of buying accommodation. You can buy the cow or you can buy the milk from the cow. The demand for cows is unchanged because someone has to own and feed that cow.
I agree that if people started to live in tents then that would constitute a drop in demand for housing. In fact I added a caveat that without the welfare system keeping people mostly in housing at the low end the picture would be different, as it is in the US where lots of people at the low end live in caravans.
People emigrating would change the number of people wanting housing and hence, by my argument, change the demand. Obviously.
Availability of credit increases the supply of money and hence the price people can pay, but it has little impact on actual demand.
Peter, no talk of the factors that can manipulate supply and demand or skew them to particular groups interests. What people take exception to is all the vested interests that manipulate supply and demand for their own interests at the expense of others. This is often at the expense of first home buyers who just want to provide for their family.
Trojan
8 Aug 2013, 11:23 AM
And all the houses around Australia would be uniformly high
Wollongong must have locked up all the nasty house pushers.
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.
Its actual demand (the people willing and able to pay the price) that matters when it comes to house prices.
The rest will rent or emigrate or sleep in tents or whatever.
So you are trying to say that renting does not constitute demand for accommodation? I would say it is just a different way of buying accommodation. You can buy the cow or you can buy the milk from the cow. The demand for cows is unchanged because someone has to own and feed that cow.
I agree that if people started to live in tents then that would constitute a drop in demand for housing. In fact I added a caveat that without the welfare system keeping people mostly in housing at the low end the picture would be different, as it is in the US where lots of people at the low end live in caravans.
People emigrating would change the number of people wanting housing and hence, by my argument, change the demand. Obviously.
Availability of credit increases the supply of money and hence the price people can pay, but it has little impact on actual demand.
I'm saying that the supply of credit inflates demand because it allows more people to be active participants.
If we had a credit crunch tomorrow and banks decided to only lend to people with 25% deposits then demand would fall.
That is demand that matters, the people who have the loot to pay.
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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