An ounce of Gold in 1900 bought a very nice suit, just as it does now.
That depends on the suit.
Gold price in 1900 was £4.25 and a median Ozzie house was £365 (Stapledon lists it at AU$730).
So say Peter and Paul each had £365 in 1900.
Peter bought 81 ounces of gold which his great-grandson Jake now has. Jake can now cash that gold for AU$115k.
Paul bought a median house which gave him, his son, his grandson and his great grandson Jack free accommodation for 100 years. Jack can cash that house for about AU$500k.
I have been saying on these forums for a long time that Australian house prices won't crash until after a bubble develops.
I think we all agree on that. What causes so much debate here is a) what are the macro signals that indicate we're in a bubble, and b) what portion of a period of prolonged house price growth represents a bubble. In other words, if prices double in the next 3 years and begin to fall so they're back to where they are now 3 years after that, will Macro Business / Steve Keen be able to take the credit for warning us first? Or would you say they were premature? What if prices then keep falling for another 10 years after that, but at a slower rate?
"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.
if prices double in the next 3 years and begin to fall so they're back to where they are now 3 years after that, will Macro Business / Steve Keen be able to take the credit for warning us first
For a person to take credit, prices would need to fall substantially below the level at which they first started calling 'bubble'. In Keen's case that would be 2008 levels.
An ounce of Gold in 1900 bought a very nice suit, just as it does now.
In fact in Roman times, according to the Count, it bought a very nice toga.
Of course if you bought a piece if land in Italy with a kilo of gold in Roman times, that same piece of land would now be worth hundreds of kilos of gold. Even the toga would be worth many ounces of gold if you could have preserved it for thousands of years.
Strindberg
16 Sep 2013, 07:34 PM
That depends on the suit.
Gold price in 1900 was £4.25 and a median Ozzie house was £365 (Stapledon lists it at AU$730).
So say Peter and Paul each had £365 in 1900.
Peter bought 81 ounces of gold which his great-grandson Jake now has. Jake can now cash that gold for AU$115k.
Paul bought a median house which gave him, his son, his grandson and his great grandson Jack free accommodation for 100 years. Jack can cash that house for about AU$500k.
Actually that median house from 1900 would be worth a hell of a lot more than $500k today. If it was in Brisbane it would be on an acre in one of the most desirable suburbs next to the CBD.
It's wouldn't be bad for me... I have multiple properties and will profit from it if it occurs.
Why do you believe it would be bad for property investors?
I assume you are happy with the present environment where house prices have not grown faster than wages for the past decade?
Would it be a bad thing for you if you and 10 other people had 90% of the money and the other 1000, in this imaginary community, shared the rest? Quite possibly.
You need to think beyond narrow self interest.
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
Actually that median house from 1900 would be worth a hell of a lot more than $500k today. If it was in Brisbane it would be on an acre in one of the most desirable suburbs next to the CBD.
And that is why well located, highly demanded properties grow faster than the median price movements suggests.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
With interest rates at record lows and house prices heading north again, talk has emerged of an impending bubble in house prices.
Investors seeking higher returns than they can get on cash or shares are stepping back into the property market.
Nationally, home prices are up 7 per cent since the market bottomed out in May last year, according to RP Data. This reflects strong growth in Sydney, which suffers from a supply shortage, and Perth where the end of the mining boom has more recently knocked some of the stuffing out of price growth.
Over the past year, home prices are up 7 per cent in Sydney and 9 per cent in Perth, but just 4 per cent in Melbourne, 2.5 per cent in Brisbane, half a per cent in Adelaide and down 1 per cent in Hobart.
But talk of a house price bubble is premature. RP Data’s research director, Tim Lawless, is certainly not entertaining talk of a bubble.
“While the recent surge in dwelling values has caused some renewed debate about an Australian housing bubble, it is important to remember that the average annual capital gain over the past decade has been just 4.3 per cent across the combined capital cities,” Lawless says.
In Melbourne, Brisbane, Adelaide, Darwin and Hobart, prices are still yet to regain their pre GFC highs.
Of all the things that keep Reserve Bank governor, Glenn Stevens, awake at night, rising house prices is not one of them.
In fact, higher house prices could help to buoy retail spending if it makes homeowners – which represent two out of three Australian households – feel richer as a result.
The banking regulator last week warned banks against relaxing their lending criteria in order to tempt new borrowers. But there seems little sign of that with annual growth in home loans at its lowest in 30 years.
While investors may be jumping into property in bigger numbers, the hurdle remains too high for many struggling would-be first home buyers.
It is true that now is a cheap time to borrow, with lenders such as UBank are advertising home loans for 4.48 per cent, which is well below the historical average of the past three decades of around 7.5 per cent.
Interest rates may be at record lows, but house prices have not fallen significantly. And saving a deposit for a first home is made even harder by lower interest rates on deposits.
As a result, the proportion of first homebuyers in the market fell to 7977 in July, down from 8760 the previous July. And that’s despite four separate interest rate cuts since then.
What is really needed to improve affordability is a pick-up in new home construction. But separate figures released last week show the number of new loans for construction fell 2.1 per cent in July.
For now, it is investors that are driving prices higher, keeping the pressure up on first home buyers.
Despite some concerns about an investor-fuelled bubble in houses, the Reserve Bank is likely to keep interest rates low for some time to come. Despite a pick-up in business and consumer confidence following last Saturday’s Coalition victory, the economy remains delicately poised. The end of the mining boom and a high Australian dollar are putting pressure on firms which are in turn not hiring as many workers. The national jobless rate has hit 5.8 per cent and is expected to head even further north.
And although higher house prices are lifting homeowner sentiment, the dollar is rising again – hitting a three-month high last week – acting as a drag on growth. The Reserve Bank may yet be forced to deliver another interest rate cut before Christmas, although much depends on what the dollar does from here.
For mortgage holders, that is doubly good news. Not only will servicing your loan be cheaper, house prices are likely to get further support from investors seeking a higher return than they can get on their deposits.
But for first homebuyers, getting a foothold in the property market is likely to remain as difficult as ever.
I see Chris Joye’s publicly coming over from the dark side as hugely significant. I actually respect his smarts, somewhat like I would respect George Soros.
He warned Australia as far back as 2003, what urban growth containment would do. Having been ignored, why not make a buck or two out of the following period of mania, with a clear conscience?
I am sure he sees it as in his best interest now to position himself as “Australia’s Peter Schiff” in the hopes of post-crash celebrity status. It would not surprise me if he makes a killing with a bit of clever “shorting”.
I am sure he is right. I absolutely defer to the wisdom, as like the case of Soros, that I cannot match – the ability to pick the peak. I share with Steve Keen, the ability to see the bubble. That makes us part of a 2% elite. The ability to pick the peak is something else again for sheer genius – like an 0.0001% elite.
I never thought the Australian bubble could have been kept going for so long and pumped so big.
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