House Prices doubling every 7 to 10 years

[Sunfish]

Not everyone has shares. Noone really *needs* shares, but virtually everyone needs property - whether they rent it, own it or owe the bank for it.

I'll apologise for this post before I even start it, But that statement would be unworthy of a high school kid!

Are you seriously suggesting that we absolutely NEED expensive McMansions? Mankind has lived on Earth two millennia since the approximate start of what we might call civilisation. This "luxury for the masses" that you take for granted has had barely 50 years life and is still only available to a privileged few (us). In the history of mankind, I would imagine that the percentage of souls on earth who have lived "in style" would be less than 1% with many zeros before the first significant figure. Mankind not only survived, it progressed. So, why do we "need" the type of house you rent out?

Now I have no more wish to live in a cave than you do (consuming Chinese still do though!) but what sets us apart? It is our thriving economy. Please explain how you can have a thriving economy without some sort of market where entrepreneurs come together to pool their resources to undertake projects which are beyond any individual? "Economy of scale" is an essential ingredient of our standard of living. Why would I wish to chip in some money if I couldn't resell my stake at a time of my choosing? How do I resell without "a market"? You may not be an entrepreneur but be thankful others are. In the same way you probably aren't a soldier but be thankful some of your oldies were. I did a little bit in uniform and I try to be an entrepreneur. Don't put $h!t on us.

As individuals neither of us must own shares, but someone must. As individuals neither of us needs to own property, but someone must. As individuals neither of us must defend the nation, but someone must. Now tell me again, why are share markets no more essential than casinos?

Throw your APIs in the bin and read something real. The web allows you access to a broad range of opinions at no cost. Take advantage of the benefits the BBs have given you.

 

[RumpledElf]

I'll apologise for this post before I even start it, But that statement would be unworthy of a high school kid!

Are you seriously suggesting that we absolutely NEED expensive McMansions?
...
Throw your APIs in the bin and read something real. The web allows you access to a broad range of opinions at no cost. Take advantage of the benefits the BBs have given you.

Wtf? I've always lived in a house/flat/unit/apartment, so has everyone else I've ever known, in Australia at least, and throughout history people have usually lived in property they either staked a claim on by building something on it, own or rent from a landlord or the crown. Hence the comment that everyone needs property - since we stopped being nomadic, anyway. But shares aren't so pervasive, and are a bit more modern ... I'm the only one in this household that owns any and I kind of just aquired them at work (super), didn't get to choose them and have no control over them, nor access to them until I'm wrinkly.

Never said anything about McMansions. And APIs are application programming interfaces around here.

 

[Token Funder]

I don't believe the Australian median house price will fall 50% anytime within the next 6 years.

PS: please look up the definition of 'straw man'.

The Straw Man is a type of Red Herring because the arguer is attempting to refute his opponent's position, and in the context is required to do so, but instead attacks a position—the "straw man"—not held by his opponent.

http://www.fallacyfiles.org/strawman.html

Sunfish stated:
'There is absolutely no reason/ property/ can't follow shares down.'.

I've broken up his statement to assist you.

You stated:
"In fact there are fundamental reasons why this won't happen/ in Australia /right now" and proceeded to attack a statement you made rather than him.

Classic straw man and your standard M.O.

Anything else I can help you with

 

[Token Funder]

I don't believe the Australian median house price will fall 50% anytime within the next 6 years.

Within or over?
Real or absolute terms?

 

[Max Carnage]

Wtf? I've always lived in a house/flat/unit/apartment, so has everyone else I've ever known, in Australia at least

Me too. Except for when I lived in a caravan, oh, and when I lived in a garage. But yes, apart from that, I've lived in 'dwellings'. So do most other people, as you correctly note.

But this would be true whether prices today were $100k, $200k, $400k or $800k. It's got nothing to do with whether prices rise or fall in the future.

You live in a house, you don't live in a share. So what? Overpriced shares get cheaper. Overpriced homes get cheaper.


Shadow - if you prefer to be the kind of person who believes rubbish, and thinks that posting a selection of cut/copy/pastes from articles is a substitute for actual thinking, that is fine by me. But I hope you're not heavily invested in your 'cause', because your case holds no water.

 

[RumpledElf]

Me too. Except for when I lived in a caravan, oh, and when I lived in a garage. But yes, apart from that, I've lived in 'dwellings'. So do most other people, as you correctly note.

Oh yes, I keep forgetting the insane number of people around here who live in parked buses. They get them towed between other people's backyards and pay a pittance in 'rent' for an extension cord for power and the use of an outdoor dunny. Except the guy who has had his bus parked for so long it has sprouted 15 annexes, a pergola and a second storey. On his own land at least, for which he paid about $1000.

Don't you just love it when people totally sidestep the conventional systems the majority subscribe to And I bet none of the bus owners own shares, either.

 

[redsquash]

If land prices were ($1), 900 years ago, and doubled every 10 years, the cost of land would be.

1497293092594469000000000000.00. Yep All those zeros are dollars.

If at 10.2%

91925301760630160000000000000000000000.00

Clearly that is not correct.

House prices have only doubled every 7-10 years for the last 30-40 years. During the period until the early 90's, there was high inflation, and they didn't double in "real terms". It's only been in the last 15 or so years, where house prices have massively increased in a low inflation environment have house prices increased in real terms, The main reason was ease of credit.

It happened worldwide, and it's unravelling as we speak.

See if first home buyers can pay 5.6 million dollars for a FHB house(todays 350,000) house in 40 years, when their wage is only 200-300 thousand.

Many people don’t understand compound interest, and the exponential function.

Everyone assumes there is such a thing as a standard house.
I am quite bemused when figures are trotted out comparing house prices of 50 or 900 years ago .
There are bigger rooms ,more complex structures, lighter stronger or more fire resistant materials. Bigger or smaller blocks of land. Two story compared to single story,higher or lower ceilings,different building materials and stricter building codes between councils/states or countries.

Going back historically seems irrelevent after a certain amount of time. How is what happend 100 years ago aplicable to today. How is 50 years ago applicable to today.
Mayabe it is and maybe it isnt , but contibuters need to clarify why they think loking at the past is so relevent to today.

On reflection I think a dollar for the cave was a tad expensive

 

[Ausprop]

If land prices were ($1), 900 years ago, and doubled every 10 years, the cost of land would be.

1497293092594469000000000000.00. Yep All those zeros are dollars.

If at 10.2%

91925301760630160000000000000000000000.00

Clearly that is not correct.

House prices have only doubled every 7-10 years for the last 30-40 years. During the period until the early 90's, there was high inflation, and they didn't double in "real terms". It's only been in the last 15 or so years, where house prices have massively increased in a low inflation environment have house prices increased in real terms, The main reason was ease of credit.

It happened worldwide, and it's unravelling as we speak.

See if first home buyers can pay 5.6 million dollars for a FHB house(todays 350,000) house in 40 years, when their wage is only 200-300 thousand.

Many people don’t understand compound interest, and the exponential function.

depends on a couple of things. if their salary grows at 7%pa then the multiple doesn't change, so yes they could afford it equally as well. Also the house that you are looking at today for $350k will not be a median priced home in 40 years. Drive for a house further out and you will find a typical median home.

 

[Shadow]

I can be very confident you haven't done economics 101 so I'm surprised you know what catchphrases exist in those textbooks.

Probably about as confident as somebody was that it was a good time to sell a house in Brisbane just before the boom, right?

The reality is most houses don't sell every month. Only a small percentage of the stock sells (hence "at the margin"). And they can easily be dominated by IP owners over a particular timeframe if there is a flood of sellers.

80,000 dwellings sold in Sydney in the past 12 months. It will take a whole lot of distressed IP owners to flood that market and drop the median by 40%. Hasn't happened. Won't happen. Please read my Kellyville example again and you might understand.

Why would they sell a cashflow positive asset at a loss? Possibly because they've levered up across the board and need the cash.

Won't they be in negative equity if prices fall 50%? How does selling a house for a 50% loss turn it into cash?

But most likely because they've lost their job and it is the only way to turn the house into cash to see them through.

Won't they be in negative equity if prices fall 50%? How does selling a house for a 50% loss turn it into cash?

I suppose they might just sell because they thought prices were going to crash.

I know someone who did that.

Then prices boomed.

Shadow.

 

[Shadow]

The Straw Man is a type of Red Herring because the arguer is attempting to refute his opponent's position, and in the context is required to do so, but instead attacks a position—the "straw man"—not held by his opponent.

http://www.fallacyfiles.org/strawman.html

Sunfish stated:
'There is absolutely no reason/ property/ can't follow shares down.'.

I've broken up his statement to assist you.

You stated:
"In fact there are fundamental reasons why this won't happen/ in Australia /right now" and proceeded to attack a statement you made rather than him.

Classic straw man and your standard M.O.

Anything else I can help you with

Sorry TF, but you are wrong here.

Sunfish said...

'But the shares have dropped 50% you say. Note the past tense. They can't drop another $25 but if they go broke you can put your head between your legs and kiss your ring goodbye. The country is toast..... All of it! The bank will own your soul!

Here we come to the bit you refuse to listen to: There is absolutely no reason property can't follow shares down.'

I took that to mean that Sunfish believes there is a good chance that property may follow shares down to a similar extent in the current cycle (since we are usually talking about the current cycle here). I simply disagreed with that suggestion.

Now, if you are actually claiming that Sunfish really meant only that property values might fall to some limited and undefined extent sometime in an undefined future period, then I agree with you and Sunfish. Property values can go down as well as up.

Anything else I can help you with?

Shadow.

PS: If you've still got a bee in your bonnet about straw man arguments, please talk to Sunfish about the McMansion comment above.

 

[Shadow]

Shadow - if you prefer to be the kind of person who believes rubbish, and thinks that posting a selection of cut/copy/pastes from articles is a substitute for actual thinking, that is fine by me. But I hope you're not heavily invested in your 'cause', because your case holds no water.

Foundation, I know you generally need to resort to this tactic when you're losing the debate and have run out of sensible arguments (which never takes long), but let's leave the petty insults and childish attacks for cphg, OK? Somersoft is a forum for grown-ups.

 

[nonrecourse]

Which just goes to the heart of this ongoing argument. The investor wanabees when presented with the mathematics behind compounding will continue to defend the undefendable. And to prove the lights are on but no one is home, they will fire back with an inane.... "what's undefendable".

The best approach to disarming a troll is to ignore his posts and do not give him any recognition.

 

[Max Carnage]

Which just goes to the heart of this ongoing argument. The investor wanabees when presented with the mathematics behind compounding will continue to...

Make up arguments that sound a little bit like counters to the points that were actually made, then argue against these. Respond to "There is absolutely no reason property can't follow shares down" with "Most (all?) shares are held by investors. Most property is not held by investors". Which, obvious to anybody with an iota of nous, is irrelevant to the future of prices. Most property is not held by investors, yet episodes around the world, and over hundreds of years, have shown that property is not immune to speculative bubbles and busts. It has happened before, and will happen again, with real estate and with stocks. And many other things, regardless of the composition of ownership.

Make up completely wrong things altogether, like "Japan for example had a much larger boom than us, and they also have a declining population". This is a non-starter because firstly their price/income ratios covered a range almost identical to ours, and secondly their population grew for a decade after their prices crashed. Invented 'facts' don't help a case.

Or make up analogies and hypotheticals that make no sense, about the balance between distressed vs non-distressed sellers or about the proportion of struggling investors...

I'm as keen on property as the next somersoftian. I just don't see how self-delusion is helpful?

 

[Shadow]

Make up arguments that sound a little bit like counters to the points that were actually made, then argue against these.

Are you referring to the McMansion strawman argument above?

Respond to "There is absolutely no reason property can't follow shares down" with "Most (all?) shares are held by investors. Most property is not held by investors". Which, obvious to anybody with an iota of nous, is irrelevant to the future of prices.

Wrong again. The fact that most property is held by owners occupiers is very very relevant to the future of prices. Always has been and always will be. It is the key factor in the long term stability of the property market and the reason why property has never been as volatile as shares. Have you learned nothing here?

Most property is not held by investors, yet episodes around the world, and over hundreds of years, have shown that property is not immune to speculative bubbles and busts. It has happened before, and will happen again, with real estate and with stocks. And many other things, regardless of the composition of ownership.

Of course. But I was arguing over the degree of magnitude. Sure property prices can fall. But shares almost always fall much further, much faster, more frequently, and with greater volatility. Hence my response to Sunfish.

Make up completely wrong things altogether, like "Japan for example had a much larger boom than us, and they also have a declining population". This is a non-starter because firstly their price/income ratios covered a range almost identical to ours, and secondly their population grew for a decade after their prices crashed. Invented 'facts' don't help a case.

Perhaps you should look at the facts for a change instead of just making stuff up as usual.

Do you see how a bit of research can be useful MB? You should try it!

'From 1955 to 1990, the value of Japanese real estate increased over 75 times. Theoretically, the Japanese could have bought all the property in America by selling of metropolitan Tokyo. Just selling the Imperial Palace and its grounds at their appraised value would have raised the cash to buy all of California... The average Japanese property in Tokyo reached USD 2 million at the height of their boom.'

Please read the thread below, and learn something for once!

http://www.somersoft.com/forums/showthread.php?t=17563

Yes, you are.

I'm as keen on property as the next somersoftian. I just don't see how self-delusion is helpful?

Yep, how's your fortress going? Delusion?

http://www.propertyinvesting.com/forums/property-investing/help-needed/25921

So buck up son. We've got a tsunami coming - Don't cry for a lost sandcastle, get building a fortress!!! (And by fortress, I mean a secure financial future, not an actual fortress!!! In fact, by late 07/early 08 you should be able to pick yourself up a nice fortress for easy 30-40% Below Market Value (BMV) in real terms...)

Cheerio, Foundation

Shadow.

 

[Sunfish]

I don't get it. Your graphic clearly shows Japan's population growing ten years after the bubble burst.

 

[Shadow]

I don't get it. Your graphic clearly shows Japan's population growing ten years after the bubble burst.

I didn't say that the Japan population went into decline immediately after the bubble burst. That was a typical red herring straw man argument thrown in by Max/Foundation.

I said that Japan has a declining population.

What my chart clearly shows is that Japans population basically flatlined (very very low growth rate, then flat) and is currently in decline.

This is a marked difference to the situation in Australia where we have had strong population growth for a long time, and currently a very high growth rate of 1.6% - this is the highest absolute population growth ever!

Japan - much bigger boom, then extremely low population growth rate followed by population decline.
Australia - much smaller boom (which already burst in Sydney half a decade ago), then extremely high population growth rate.

So you see - it is different here.

Shadow.

 

[yieldmatters]

It's different here

US, UK, Ireland, Spain, NZ etc had a debt fueled property bubble that is unwinding in a big way. It's different here though.

 

[Shadow]

US, UK, Ireland, Spain, NZ etc had a debt fueled property bubble that is unwinding in a big way. It's different here though.

Sure is.

Shadow.

 

[Max Carnage]

I don't get it. Your graphic clearly shows Japan's population growing ten years after the bubble burst.

Never let the facts stand in the way of a good delusion, Sunfish!

What my chart clearly shows is that Japans population basically flatlined (very very low growth rate, then flat) and is currently in decline.

This is a marked difference to the situation in Australia where we have had strong population growth for a long time, and currently a very high growth rate of 1.6% - this is the highest absolute population growth ever!

Again, absolute rubbish.

3105.0.65.001 - Australian Historical Population Statistics, 2008 1. Population Size and Growth:

If the rate of population growth is the primary driver of prices (which it isn't), we should expect prices to grow more slowly than at any other time in history except the two world wars (falling nominal and real prices), the great depression (falling nominal and real prices), the mid 1970s (price growth < inflation) and the 1990s (price growth < inflation).



Never let reality come between you and your delusion. Give it the what-for, eh?

 

[Max Carnage]

US, UK, Ireland, Spain, NZ etc had a debt fueled property bubble that is unwinding in a big way. It's different here though.

I'm not so sure about that!