Because ever increasing capital gains is impossible, it relies on ever increasing wages and/or ever increasing debt, and if our GDP isn't growing at the same pace this will rely on either of more offshore funding via RMBSs (good luck with that) or inflation (sharpen the pitchforks).
So just like every other time the banks start handing out IO loans to the great unwashed and ignore the fact that house prices are a function of rent, eventually some little kid will point out amongst the madness that the emperor's not waearning any clothes, prices will come tumbling down and we start all over again.
But anyways Mad Frankie it sounds like you're a guy who's in the long game with property, so if this scenario did unfold it's unlikely to affect you, right? In fact with all that capital you've supposedly got stashed away you should be able to bag a few bargains in a downturn.
"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.
ever increasing capital gains is impossible, it relies on ever increasing wages
When did Australian wages not increase?
Quote:
every other time the banks start handing out IO loans to the great unwashed and ignore the fact that house prices are a function of rent, eventually some little kid will point out amongst the madness that the emperor's not waearning any clothes, prices will come tumbling down and we start all over again.
Is that really what happened every other time the banks start handing out IO loans to the 'great unwashed'?
Can you list a few such occasions where the result was Australian house prices tumbling down and starting all over again?
If that has been the result every other time, then you shouldn't have any difficulty identifying those occasions...
Negative gearing is responsible for concentrating property in the hands of the few at the expense of housing affordability for the many, and it needs to be phased out.
Nope. If anything, negative gearing encourages mum+dad investors and spreads the approx. 30% of homes that are rental stock amongst the widest possible population.
Bollox.
If they were buying new kit it would be a different story.
But the isn't so all we get is increased demand in the face of an inadequate supply resulting in house price inflation which, whether you like it or not, damages affordability for aspiring buyers.
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
Because ever increasing capital gains is impossible, it relies on ever increasing wages and/or ever increasing debt, and if our GDP isn't growing at the same pace this will rely on either of more offshore funding via RMBSs (good luck with that) or inflation (sharpen the pitchforks).
nominal gains can be infinite though can't they Soul? the price of protein in Zimbabwe went apeshit at one stage
APF - a place where serious people don't take themselves too seriously. There's nothing else like it.
where did I say they didn't? I'm implying that there is difficulty in increasing them going forward, if you see Australian businesses struggling to stay cost competitive in a global market as a guide.
Quote:
Is that really what happened every other time the banks start handing out IO loans to the 'great unwashed'?
Can you list a few such occasions where the result was Australian house prices tumbling down and starting all over again?
If that has been the result every other time, then you shouldn't have any difficulty identifying those occasions...
Again I'm not implying that it's happened here before.
It's what I've noticed in other western countries over the last 10 years though - I lived through it in the UK , and there are numerous examples from other countries whose outcomes are well documented.
Can you offer some compelling reasons as to why Australia will be 'different' should prices begin to outstrip wages growth for an extended period?
"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.
That's a different argument - nobody was discussing house prices outstripping wage growth for an extended period.
You said... 'ever increasing capital gains is impossible, it relies on ever increasing wages'
In Australia, capital gains have simply increased in line with income growth over the past decade.
There's no reason why that can't continue indefinitely.
it's not a different argument - my original comment that prompted Frank's question related to the fact that an increase in IO loans is a warning signal that property markets are heating up, that people are so desperate to get a foothold on the housing ladder so they make a commitment to' tread water' with an IO loan, in the hope that either their wages will go up (thus allowing them to start paying off the principal) or they will realise capital gains and sell up or use that gain to lever up with more property.
If you don't think this is a problem then I would very much like to hear your reasons.
"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.
nominal gains can be infinite though can't they Soul? the price of protein in Zimbabwe went apeshit at one stage
If I was in Tony/Joe's shoes now I would be seriously considering how much inflation we could get away with in the next few years without losing our financial reputation.
Not that this would help with my plans to save another year or two for a deposit
"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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