We will have a property crash, but this isn’t it! (M. Yardney)

[rogue]

And why are rental prices too high? Answer, demand is high.
Anyway, you sidestepped my question below (in bold)...
Why would people be co-habiting if there was less demand. Surely the fact that people are forced to co-habit is a symptom of MORE demand.

Yes. Did i not give co-habiting as an example of what could happen if demand for housing exceeded supply?

When/where did I fail to acknowledge reports of bank losses and job losses?

You mentioned that we are not UK/USA/Spain, but we are experiencing exactly the kind of economic conditions that the UK was 1 year ago, so in that sense you fail to acknowledge the signs.

 

[Shadow]

Where on this site exactly?

There is heaps of info on the RBA site. If you want to find the location of the chart I posted above showing the 0.3% loans in arrears rate, just right click on the chart and view the location.

Did the price of water go up during the drought? No. Has the cost of cars gone up/down in response to demand? No. Does the cost of a movie ticket to the Dark Knight go up because of high demand? (great movie by the way ).

No in all cases because the supply was able to meet the demand. In the case of Picassos and houses, the supply is not meeting the demand, so prices rise. In the case of DVDs, cars, and Dark Knight tickets, the supply meets the demand, so prices fall or stay steady.

Water SHOULD be more expensive, if the government had any sense...

 

[Shadow]

Yes. Did i not give co-habiting as an example of what could happen if demand for housing exceeded supply?

First of all you said that high demand would force people to co-habit and then you said that when people co-habit it would become a renters market as demand drops. You can't have it both ways. If people are forced to co-habit, then it is not a renters market ... they would be only be doing it because prices are high and they need to co-habit in order to afford the rent by sharing the total cost. If it was a renters market they would not be co-habiting in the first place!

You mentioned that we are not UK/USA/Spain, but we are experiencing exactly the kind of economic conditions that the UK was 1 year ago, so in that sense you fail to acknowledge the signs.

Our economic conditions are nothing like the UK or USA or Spain, never mind the fact that our population growth rate is 4x the UK population growth rate.

 

[warmed_cockles]

Our economic conditions are nothing like the UK or USA or Spain, never mind the fact that our population growth rate is 4x the UK population growth rate.

Yet strangely not that much stronger than NZ population growth, which has enjoyed a strong commodity boom recently, and is also heading for a recession and house price correction.

 

[rogue]

First of all you said that high demand would force people to co-habit and then you said that when people co-habit it would become a renters market as demand drops. You can't have it both ways. If people are forced to co-habit, then it is not a renters market ... they would be only be doing it because prices are high and they need to co-habit in order to afford the rent by sharing the total cost. If it was a renters market they would not be co-habiting in the first place!

People aren't going to pay more than they can afford. If rent becomes too unaffordable for one person they will likely share with others. And in my experience from my teen years of sharing a house with others... a house rented by a couple rents for the same as a house with 6 students living in it. This might not neccessarily reduce rents due to bigger households, but it would certainly stabilise and prevent rents from moving to levels that are unaffordable for the general population.

Our economic conditions are nothing like the UK or USA or Spain,

I just can't believe you think that. Actually.... no.... I can.

never mind the fact that our population growth rate is 4x the UK population growth rate.

UK's population growth rate is less than Australia's BUT UK's population is also 60,000,000 to our 20,000,000, so that percentage equates to the same number of people (around 300,000 p/y). All in a country that is the size of Victoria!

 

[yieldmatters]

Our economic conditions are nothing like the UK or USA or Spain, never mind the fact that our population growth rate is 4x the UK population growth rate.

Our economic conditions are similar infact - all those countries consume more than they make and fund it with debt.

 

[BayView]

Our economic conditions are similar infact - all those countries consume more than they make and fund it with debt.

Hey, for once we agree YM.

And, of course, now that there are no liar loans available to the masses, they all have to qualify for loans using the more "traditional" Bank criteria - 80% lend, 20% deposits, 33% of income serviceability etc - which none of them can.

This means, very few qualified buyers around, even at cheaper interest rates (as in the USA currently).

It's hard to sell houses when there are no buyers, but there will still be some - just not very many.

The longer term effect will be a property slow-down until the sheeple can get their finances in order, houses become more affordable or both.

People who don't need to sell simply won't - they'll take their homes off the market until the sunshine returns, while those who do need to sell will probably cop a loss.

 

[Rockstar]

Shadow and Rogue,

One thing is for certain - you guys are great debaters.

Just don't debate your whole life away.

 

[ruroshin]

I don't know why Shadow and Rogue bother at all, I've seen the same argument on both sides again and again and neither sides acknowledges the other. Its just an endless loop going around in circle.

Its been over a year and nothing seems to have changed, PIers still buying and D&Gers still sitting it out and saving up. Shadow, I don't think you're gonna convince Rogue, Rogue I don't think you're gonna convince Shadow. Lets just agree to disagree.

 

[Shadow]

Yet strangely not that much stronger than NZ population growth, which has enjoyed a strong commodity boom recently, and is also heading for a recession and house price correction.

Not much stronger? What... 60% is 'not much'?

Australia has a housing shortage, whereas NZ has a surplus.

Approx 2500 kiwis per month are permanently moving to Australia (double the rate of two years ago).

NZ has had nothing like the terms of trade boost that the commodities boom has delivered to Australia.

Australia has a much stronger budget surplus than NZ, and it is forecast to be even stronger in the future.

Australia's real GDP is forecast to increase by 2%+ in 2008-09, while NZ is forecast to increase only by 0.5%.

The NZ drought has slashed their farm production, their primary export market.

NZ probably will have a house price correction, as will some cities in Australia, as did Sydney from 2004-2008.

But this is not the big crash that you D&Gers are holding out for. Not yet.

You'll have to wait until after the next boom.

I often see the D&Gers say 'we're just like NZ' or 'we're just like UK and USA'.

But we're not. There are significant differences between Australia and NZ, UK, USA, Spain etc.

 

[RumpledElf]

Yup, no drought in Australia. Its different here.

 

[Shadow]

Yup, no drought in Australia. Its different here.

Mining boom not affected by drought. It's different here.

 

[warmed_cockles]

Not much stronger? What... 60% is 'not much'?

Australia has a housing shortage, whereas NZ has a surplus.

Approx 2500 kiwis per month are permanently moving to Australia (double the rate of two years ago).

NZ has had nothing like the terms of trade boost that the commodities boom has delivered to Australia.

Australia has a much stronger budget surplus than NZ, and it is forecast to be even stronger in the future.

Australia's real GDP is forecast to increase by 2%+ in 2008-09, while NZ is forecast to increase only by 0.5%.

The NZ drought has slashed their farm production, their primary export market.

NZ probably will have a house price correction, as will some cities in Australia, as did Sydney from 2004-2008.

But this is not the big crash that you D&Gers are holding out for. Not yet.

You'll have to wait until after the next boom.

I often see the D&Gers say 'we're just like NZ' or 'we're just like UK and USA'.

But we're not. There are significant differences between Australia and NZ, UK, USA, Spain etc.

There are plenty more overlapping similarities with all those countries, yet at every turn, you think Australia is different enough to avoid calamity. Simply not the case

Incorrect points:

1. It is ill advised to derive percentages from percentages. Australia's population increase is 0.6% greater than New Zealand's.

2. Surplus of housing? From two days ago.

http://tvnz.co.nz/view/page/536641/1977479

Real Estate Institute of New Zealand national president Murray Cleland says much of the drop in sales volume could be attributed to a severe shortage of property "stock" on the market - making buying choices markedly harder.

3. NZ has had a much larger terms of trade boost than Australia

While the rest of the world is coming to terms with houses needing to be within the realms of affordability, you seem to think Australia is different enough to avoid ever being affordable for most and will expand in another boom that will put houses even further out of reach.

 

[Shadow]

Who is 'we' and when did 'we' revert back? The house price vs income ratio in Australia has been trending steadily upwards for 40 years. It has never reverted back to the levels of 30 years ago.

We is Australia. And i was talking migration levels, not house price vs income.

No... you were talking about the house price vs income ratio...

But houses are different? Despite being essential, they should always revert to the price vs income trend from 30 years ago, regardless of supply and demand?

They always have before, despite having similar levels of net migration previously we have always reverted back.

 

[Red Car]

I dont know if this is right but there is something in it I think:

http://www.news.com.au/business/money/story/0,25479,24136331-5013951,00.html

 

[Shadow]

Incorrect points:

1. It is ill advised to derive percentages from percentages. Australia's population increase is 0.6% greater than New Zealand's.

Wrong.

If Australia has 1000 people, and our population grows by 1.6% then we get 16 more people.

If NZ has 1000 people, and their population grows by 1.0% then they get 10 more people.

Australia's population growth rate is 60% higher than New Zealands.

We get 60% more people per head of population than NZ.

2. Surplus of housing? From two days ago.

http://tvnz.co.nz/view/page/536641/1977479

http://www.nzherald.co.nz/topic/story.cfm?c_id=292&objectid=10507797

NEW ZEALAND

Economists are warning that the housing market is becoming over-supplied, which will place more pressure on falling house prices.

Net migration has been falling even faster than house building has slowed, meaning fewer houses are needed.

O'Donovan predicts the excess supply of houses will reach 5000 by mid-next year.

There is already a glut of homes on the market. Housing sales dropped by 50 per cent in March compared with the same time last year. "We're holding more properties than ever, but that's not because there are more listings occurring, it's because there are fewer sales," says the chief executive of Ray White, Carey Smith.

3. NZ has had a much larger terms of trade boost than Australia

While the rest of the world is coming to terms with houses needing to be within the realms of affordability, you seem to think Australia is different enough to avoid ever being affordable for most and will expand in another boom that will put houses even further out of reach.

Housing is affordable for 99.7% of mortgage holders, according to the RBA.

 

[Shadow]

I dont know if this is right but there is something in it I think:

http://www.news.com.au/business/money/story/0,25479,24136331-5013951,00.html

The problem with the Demographia survey, is that it only compares Australia with five other countries, yet claims to be a 'global' survey. It conveniently ignores all the countries in the world with much higher house prices than Australia. Here are some alternative studies...

GlobalProperty Most Expensive Cities 2008 (apartment price per sqm):
http://www.globalpropertyguide.com/investm...-cities-in-2008
Sydney - Number 13: US$7,085 per sqm

Mercer Most Expensive Cities (cost of living, including housing)
http://www.mercer.com/costofliving
Sydney - Number 21

CityMayors Expensive Cities
http://www.citymayors.com/economics/expensive_cities2.html
Sydney - Number 24

Knight Frank Survey (prime residential property)
http://www.finfacts.com/irelandbusinessnew..._10010019.shtml
Sydney - Number 8: EU$13,100 per sqm

Overseas Property Mall Survey
http://www.overseaspropertymall.com/proper...tional-markets/
Average home values for select 2,200 square foot single-family dwellings with four bedrooms...
Tokyo - $785,818
Sydney - $683,109

Aneki (most expensive countries to live in)
http://www.aneki.com/expensive.html
Australia - Not shown in the top 20

Most expensive countries in the world
http://www.associatedcontent.com/article/1...the.html?page=2
Australia - Not in the list

Most expensive rental markets
http://www.forbes.com/2008/02/11/properties-world-rent-forbeslife-cx_mw_0212realestate.html
Australia - Not in the list

Shadow.

 

[warmed_cockles]

Wrong.

If Australia has 1000 people, and our population grows by 1.6% then we get 16 more people.

If NZ has 1000 people, and their population grows by 1.0% then they get 10 more people.

Australia's population growth is 60% higher than New Zealands. We get 60% more people per head of population than NZ.

No, you cannot do it that way. Say a country's population grows by 10% and another's grows by 16%. Does this mean their differences are equivalent to the countries with 1.6% and 1.0% growth? No. Deriving percentages from percentages is an incorrect and distorted way of looking at things.

Australia is growing 0.6% faster than New Zealand.

Housing is affordable for 99.7% of mortgage holders, according to the RBA.

As I've stated before, the default rates might be small, but they are still records in terms of Australia's history. This is in the absence of a recession and high unemployment.

 

[Shadow]

Australia is growing 0.6% faster than New Zealand.

No. Australia's population growth rate is 60% higher than New Zealand's population growth rate.

1.6 is 60% higher than 1.0

16 is 60% higher than 10

160 is 60% higher than 100

etc.

Think about it.

As I've stated before, the default rates might be small, but they are still records in terms of Australia's history. This is in the absence of a recession and high unemployment.

The chart was posted in response to your suggestion that...

'Australia is unaffordable for most' and that another boom would 'put houses even further out of reach'

The chart simply shows that Australia is NOT unaffordable for most. Australia is affordable for 99.7% of mortgage holders. The majority of Australians are well ahead on loan repayments, according to the RBA.

Shadow.

 

[warmed_cockles]

No. Australia's population growth rate is 60% higher than New Zealand's

1.6 is 60% higher than 1.0

16 is 60% higher than 10

160 is 60% higher than 100

etc.

Think about it.

16 is 60% higher than 10, but in terms of the base, it is only .6% higher.

Consider this semi-hypothetical. NZ's population is around 4 million, Australia's 20 million. Australia's 5 times bigger than NZ.

The stated population increases would give Australia a population of 20.32 million and NZ a population of 4.04 million. This would mean Australia's population is now 5.02 times greater than NZ. A rate of change (Australia's population growing wrt NZ's population growth) of 0.59%. Not 60%.

The chart was posted in response to your suggestion that...

'Australia is unaffordable for most' and that another boom would 'put houses even further out of reach'

The chart simply shows that Australia is NOT unaffordable for most. Australia is affordable for 99.7% of mortgage holders. The majority of Australian's are well ahead on loan repayments, according to the RBA.

It doesn't suggest that at all. Ahead on loan repayments in 2007, while now we are seeing drops in consumer spending, a slowdown in the housing figures, and a number of people choosing to rent or stay with family in preference to buying. This suggests that housing is historically unaffordable.

We're having historical highs for defaults, and yet you believe house prices can go higher? If more people than ever before are struggling with a mortgage, then it doesn't seem likely that another boom is on the way.