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Tony Abbott and Joe Hockey welcome rising house prices; When house prices go up, everyone in the market has a more valuable asset, says Prime Minister
Topic Started: 27 Sep 2013, 04:12 PM (2,671 Views)
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Abbott backs RBA to head off housing bubble

The Coalition government has welcomed rising interest in property investment, with Prime Minister Tony Abbott signalling faith in the Reserve Bank of Australia’s ability to head off a potential house price boom by boosting official interest rates.

“I certainly think that it’s important to get more houses built,” Mr Abbott told radio station 3AW on Friday.

“If there’s a strong market for flats and for houses, that’s a good thing, not a bad thing.”

Treasurer Joe Hockey told reporters in Canberra that he was not worried about a housing bubble and rising prices should help generate new construction.

“The most important point at this stage is that there is confidence back in the real estate market in Australia,” Mr Hockey said.

“Rising house prices actually help to make marginal property development viable. And there is a shortage of supply out there and what this will do is make supply more readily available.”

Mr Abbott also welcomed rising property prices.

“Don’t forget … if housing prices go up, sure that makes it harder to get into the market, but it also means that everyone who is in the market has a more valuable asset,” he said.

Read more: http://www.afr.com/p/national/abbott_backs_rba_to_head_off_housing_K3C9Qa99FlblXmEET4vVLK
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Home truths to quash the hysterics

Stephen Koukoulas

Have a cup of tea and a good lie down. The house price debate is rapidly running off the rails and throwing up all manner of furphies, melodrama and misconceptions.

The current lift in house prices (House price bull heaven, September 18) would barely be registering on the Reserve Bank’s wall of worry, despite the quite extraordinary beat-up (How the cork was popped on property demand, September 18) in some parts of the commentariat.

Let’s set out a few home truths.

Even though house price growth is reasonably solid at the moment, with prices up around 5.6 per cent over the past year, at least according to the RPData series, all that is happening is a catch-up from the house price falls that were evident between 2010 to early 2012. It is no more than this.

In other words, the level of house prices now is roughly the same as three years ago. The quarterly ABS house price series shows a similar trend to that shown by RPData, with the weighted average of eight capital city house prices up just 0.5 per cent between the June quarter 2010 and the June quarter 2013. That is an average annual increase of 0.1 per cent!

Bubble? Trouble? Hardly.

According to the ABS data, house prices have risen 15.9 per cent over the past five years, which means the annual average increase for half a decade has been just 3 per cent, which is hardly the stuff that would be causing most sober analysts, policy makers or investors much concern.

Unfortunately, the headline grabbers, those jumping at shadows and creating make believe market monsters can get high profile coverage with outlandish claims of bubbles. They often link the price changes to household debt and the experience in countries like Ireland, the US, Spain and the UK, where house prices fell by up to 50 per cent during the financial crisis.

The links are spurious.

Perhaps those making up the house price bubble issue have memories of the surge in house prices in the late 1990s and early 2000s. At that time, the heavily politicised Reserve Bank, under Governor Ian Macfarlane, squibbed on a series of monetary policy tightenings. This not only fuelled rampant house price rises, but unleashed a more general inflation problem for the economy that persisted from 2006 to 2009 and was only really tamed when the global recession hit Australia.

But that experience was largely the result of inept policy making from the Reserve and a lack of fresh housing supply. It is assumed, quite wrongly, that the bank will make the same errors and that housing supply will not lift to meet the lift in demand.

For now, the house price rises are firm and are from a low base – and justified on supply constraints, favourable affordability and the broadly based economic prosperity that has been enjoyed over the last decade or so.

There is also a perception from the house price ‘bubblers’ that the Reserve Bank will sit back and do little or nothing if the lift in house prices gets too far ahead of itself.

While that may have been a fair assumption if Ian Macfarlane were RBA governor with a Coalition government, current Governor Glenn Stevens will act without fear or favour if he feels there are systemic risks from unjustifiably strong increases in house prices.

It would be absurd to think that if there was an unwelcome and unsustainable house price acceleration that Glenn Stevens would not step in with interest rate hikes as the no-brainer policy response. This would be the case even if it meant the Australian dollar was a bit too high or that other interest rate sensitive parts of the economy copped some fallout in a scenario of monetary policy tightening.

Of course, excessive house price growth is undesirable, particularly when it is driven by speculation and leverage, but for now, there is scant evidence that this is behind the rise in house prices over the past 18 months or so. One highlight of this week’s RBA Financial Stability Review was that credit growth was so weak, not strong, that banks would relax their lending standards to try to boost market share. Rather than a bubble, there is an ongoing slump in housing credit.

If, and it’s a big if, we see house prices up 20 per cent in two years’ time, you can bet the granny flat that interest rates will be significantly higher than now and that prices growth will be about to be on a path lower. For now, rest easy – house prices have recorded no net growth in the last three years, the recent rise is fundamentally based and will not get out of hand given the likely pragmatic approach from the RBA.

Read more: http://www.businessspectator.com.au/article/2013/9/27/property/home-truths-quash-hysterics
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apex
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“The most important point at this stage is that there is confidence back in the real estate market in Australia,” Mr Hockey said.

Mr Abbott also welcomed rising property prices.

“Don’t forget … if housing prices go up, sure that makes it harder to get into the market, but it also means that everyone who is in the market has a more valuable asset,” he said.
This makes me feel physically sick.

There's bugger all chance of house prices correcting to sensible levels with this mob in charge.

What a waste of a vote.
Edited by apex, 27 Sep 2013, 04:18 PM.
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Veritas
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Bonfire of the vanities.
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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mango66
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apex
27 Sep 2013, 04:18 PM
This makes me feel physically sick.

There's bugger all chance of house prices correcting to sensible levels with this mob in charge.

What a waste of a vote.
What you didnt know that. Doesnt matter your fucked either way
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Pig Iron
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apex
27 Sep 2013, 04:18 PM
This makes me feel physically sick.

There's bugger all chance of house prices correcting to sensible levels with this mob in charge.

What a waste of a vote.
they've had their correction, you were just too greedy to see it.
I am the love child of Tony Abbott and Pauline Hanson
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Black Panther
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Pig Iron
27 Sep 2013, 07:49 PM
they've had their correction, you were just too greedy to see it.
Absolutely Spot On.
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Veritas
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Pig Iron
27 Sep 2013, 07:49 PM
they've had their correction, you were just too greedy to see it.
Greedy?

A moral judgement from the man who thinks the poor should stop whinging for aren't they better off than Sudanese villagers?

Where is the puke smiley?
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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Pig Iron
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Veritas
27 Sep 2013, 09:59 PM
Greedy?

A moral judgement from the man who thinks the poor should stop whinging for aren't they better off than Sudanese villagers?

Where is the puke smiley?
care to post the link to that quote your attributing to me?
I am the love child of Tony Abbott and Pauline Hanson
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Trojan
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apex
27 Sep 2013, 04:18 PM
This makes me feel physically sick.

There's bugger all chance of house prices correcting to sensible levels with this mob in charge.

What a waste of a vote.
I thought the 40% crash was inevitable?
:lol
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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