Best article on property I've read for a long time (perhaps ever)

[tubs]

Written by Ross Gittins for SMH. Really drives the point home about what drove the last boom, and what the real effect of Rudd's proposals will be.

http://www.smh.com.au/articles/2007/07/10/1183833515426.html?from=top5

On low interest rates and easy credit (also confirms my point that its people buying PPORs (majority of the market) who drive prices, not investors):

People didn't have to react to the increase in their borrowing power by borrowing more, but many of them did. They decided it was the perfect opportunity to do what they'd long wished they could afford to do: trade up to a better house.

And because so many people had the same idea at pretty much the same time, the main thing they achieved was to bid up the prices of essentially the same bunch of houses.

But the whole second half of the article drives point after point home.

 

[LynnH]

tubs

I agree - it's a very good article. I found myself nodding my head vigorously when Gittins made the point: "anything you could do to make it easier for people to afford to pay the existing prices is likely to prove counterproductive".

FHOG, stamp duty reductions, low interest rates, shared equity loans - and all the other proposals the pollies have come up with over the years have only resulted in increased prices. When, oh when, will they all realise that if they stopped fiddling with the housing market, then the 'housing problem' will eventually sort itself out??

But then I guess they have to be "seen" to be doing something, don't they???

Cheers
LynnH

 

[XBenX]

IMHO Gittins is the best economics writer around. Ive been reading his articles since high school economics and they are still as relevant for me today as they were back then.

He makes economics easy to understand.

 

[alexlee]

Yes, it's a great article. All this stuff about land audits and first home buyers not being able to afford housing is bs. How can you have falling prices in Sydney's West while people are moaning they can't buy? It's just because they want more than they can afford.
Alex

 

[Pushka]

Not to mention having to have plasma Tv's, home theatre rooms, etc etc.
When we built, we put as much money into the building as possible, but had sheets up for curtains, no floor coverings like carpets etc, borrowed beds and stuff from the rellies, everything was second hand, even the TV.

You never see sheets up for curtains anymore, do you!

 

[TheCamel]

You never see sheets up for curtains anymore, do you!

We did this!

 

[VYBerlinaV8]

Most people don't bother to seriously consider, or understand, their financial behaviour. As far as I'm concerned, anything that increases demand is good for the property investor.

 

[jackofall]

I have only recently joined this forum & new to world of IP, but what a stroke of luck it was to get to read the Gittens article. Easy to follow the supply & demand points, and gain a simple understanding of property economics.....

 

[WashingtonBrown]

Yep great article..his skill is making it always sound so simple....

 

[gerd.]

The majority of the population tend to see extra serviceability ( Extra money to spend ) as a license to buy anything and everything there heart desires. This creates opportunity's for the more financially experienced members of the investment fraternity . Thats why most of use are hear, to be able to take advantage of the opportunity's created by the majority.

Gerd

 

[marcodepaul]

Yes we did the sheets for curtains thing and looked down behind the cushions of the lounge the night before pay-day in order to buy a litre of milk to put on the kid’s cornflakes in the morning.

On another matter though, if house prices have doubled on average every ten years since who knows when (can’t remember the stat- perhaps someone does), why is the current affordability crisis so extraordinary?
Weren’t first home buyers hurting in the 90’s, 80’s 70’s and so on?.

Is there an underlying problem with wages growth?
During the last ten years the union movement has been the most tame of their 150 year history.
Of course the big advantage of steady wages growth is a low inflation rate , which property investor’s reap the rewards for through reasonable interest rates.

 

[Nullagine]

Prices are falling in parts of Sydney because incomes there are falling because there is less work because it is more difficult to sell Sydney made stuff because the $Aus is higher because Japanese are buying $Aus because they want Aus more iron or and coal because ...

 

[lizzie]

You never see sheets up for curtains anymore, do you!

they can look very nice with a cheap spotlight tieback. .... but make sure you put in enough drawing pins so they don't fall down

 

[LynnH]

lizzie

We found that nails were much longer-lasting as far as keeping sheet/curtains in situ goes ..... but, yes, Spotlight tie-backs look just fine - a wonderful decorative touch!

Cheers
LynnH

 

[Tizzy]

Hahahahaha well geez I never had sheets at the window, I just applied brasso to the glass. It worked well for ages.

 

[Pushka]

Newspapers worked for some too! Brasso - so that is what people used to block out their windows!

 

[Tizzy]

It was commonly used in England and Scotland.

 

[EstatePreneur]

Bravo! Thanks to the writer and tubs who posted the article here.

It's a good read indeed!

 

[Peter 14.7]

IMHO Gittins is the best economics writer around. Ive been reading his articles since high school economics and they are still as relevant for me today as they were back then.

He makes economics easy to understand.

Ditto. Now to read the article. Peter

 

[geoffw]

The article is excellent.

But I've wondered about the extra demand on housing from investors.

I became aware of real estate investment through seminars from Peter Spann. And there were many thousands of people who did seminars from him and from others. Judging by comments from Peter and from what I've seen, many more people chose to invest in real estate than in shares.

And then there have been the lifestyle reno shows, just to make sure the point is reinforced.

Even now, the "current affairs" shows bring new stories every week about people investing in real estate. If the market research of ACA and TDT was up to scratch, it means that the audience is very interested, still.

So I'm wondering if Mr Gitten's analysis, though excellent, does not take into account the small, but economically powerful, effect of increasing investor activity. Which, in itself, could be self perpetuating. The more investors buy at increasing prices, the more renters are forced out of the housing market.