Australia's Housing Frenzy(bloomberg.com)
bloomberg.com
Australia's Housing Frenzy
https://www.bloomberg.com/news/articles/2017-11-23/australia-faces-housing-hangover-twice-size-of-u-s-subprime-era
148 comments
But that would be... inflation! High inflation would affect collective bargaining agreements, benefit increases, super increases and all sorts of measures designed to keep compensation increases in line with increased cost of living.
Central bank keeps telling us that inflation is "on target" at just 2% or 3% p/a for about the last 5 years. Meanwhile, housing inflated more like 40% (70% in Sydney!)[2] over that time, so how does that work?
OH WAIT, housing was excluded from CPI[3]. I wonder who decided that, and whose interest(heh) that might possibly be in?
[1] https://www.rba.gov.au/inflation/inflation-target.html
[2] http://www.huffingtonpost.com.au/2017/03/20/this-chart-shows...
[3] http://www.abc.net.au/news/2017-04-20/inflation-data-suffers...
Central bank keeps telling us that inflation is "on target" at just 2% or 3% p/a for about the last 5 years. Meanwhile, housing inflated more like 40% (70% in Sydney!)[2] over that time, so how does that work?
OH WAIT, housing was excluded from CPI[3]. I wonder who decided that, and whose interest(heh) that might possibly be in?
[1] https://www.rba.gov.au/inflation/inflation-target.html
[2] http://www.huffingtonpost.com.au/2017/03/20/this-chart-shows...
[3] http://www.abc.net.au/news/2017-04-20/inflation-data-suffers...
Also, QE has involved giving banks trillions of dollars. The banks then either sit on the money, or use it to inflate the stock market and property markets. The stock market triples or quadruples and everyone says the economy is going well. The money never makes it to non-asset owning working stiffs, and consumer prices as measured by central bank mandated CPI measures don't really change. So the central bank and Keynesian economists brag that "inflation is under 2%! QE stimulus really is a no downside perpetual motion free growth machine!". And the press states that "nobel prize laureates" call for and support these measures, and politicians and the public assume that a "nobel prize laureate" in economics is like a "nobel prize laureate" in hard science, where awards are given for settled progress in science that everyone agrees on. And people don't realise that macro-economics and monetarism are nowhere near settled science, and that there are PLENTY of people still calling bullshit from the austrian/chicago school.
Sadly it looked like this silliness was going to continue forever.
Fortunately, the market has given us inflation-proof cryptocurrency, and these central banking bastards are finally going to have to test their theories and put their ideological balls on the line in a free market with the ability of nation states to control currency as the price for shitty science. Good luck to them - they will need it.
Sadly it looked like this silliness was going to continue forever.
Fortunately, the market has given us inflation-proof cryptocurrency, and these central banking bastards are finally going to have to test their theories and put their ideological balls on the line in a free market with the ability of nation states to control currency as the price for shitty science. Good luck to them - they will need it.
Whats to stop crypto currencies from being just another asset class, to be hoarded exclusively by rich?
Are you saying that you see crypto as a possible solution to this problem? Can you elaborate at all on that?
Previously the only real options we have to use as "money" are nation-state derived and under the control of central bankers. For various reasons, nothing else (eg. gold, stocks, property) presented a practical alternative to state issued money in fulfilling the core functions of:
- medium of exchange
- unit of account
- store of value
Central banks and governments always ended up debasing their currencies. They ranged from super-corrupt to just believing weird keynsian-stimulus stuff, and always end up printing money and debasing the currency. QE given to corrupt politicians as happens in africa enriches the politicians at the cost of everyone else holding or earning the currency. QE given to bankers as in USA enriches asset owners at the cost of savers and wage earners.
Finally, cryptocurrencies with fixed, limited inflation schedules provide a competitive non-inflationary alternative to state issued currency.
Finally, cryptocurrencies with fixed, limited inflation schedules provide a competitive non-inflationary alternative to state issued currency.
I don't know about Australia but if it's like the US, housing is not excluded entirely but there is a lag based on how long it takes for rents to rise.
People are not all affected by changes in housing prices immediately. If you own your home or pay below market rent you won't be affected until later. A survey asking how much people actually pay will have a built-in lag.
People are not all affected by changes in housing prices immediately. If you own your home or pay below market rent you won't be affected until later. A survey asking how much people actually pay will have a built-in lag.
People generally don’t borrow money to pay their rent, so rent prices are restricted by local salaries.
People borrow the vast majority of the cost of a house to buy it, so housing prices are largely only restricted by how much banks are willing to lend and how much it costs to borrow — all of which is heavily influenced by central banks.
People borrow the vast majority of the cost of a house to buy it, so housing prices are largely only restricted by how much banks are willing to lend and how much it costs to borrow — all of which is heavily influenced by central banks.
Also, no one speculates on real estate by renting. It isn’t just how much money buyers can borrow, even if they are paying for it all in cash and don’t plan on living in the property, it also about perceived upside.
That is an obvious statement, and yet it has never occurred to me. I now (finally) understand why renting is generally a better decision than buying.
Glad to hear it helps!
The NYT has a good “buy vs rent calculator” that’s worth checking out:
https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
Even though the calculator is useful, it’s important to have a really good understanding of why housing is so much more expensive today (as a percentage of avg annual income) than it was 50-60 years ago. For that I recommend a short, but extremely useful book, The Housing Trap:
https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
The NYT has a good “buy vs rent calculator” that’s worth checking out:
https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
Even though the calculator is useful, it’s important to have a really good understanding of why housing is so much more expensive today (as a percentage of avg annual income) than it was 50-60 years ago. For that I recommend a short, but extremely useful book, The Housing Trap:
https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
No do not confuse land prices with rents. Rents are set by wages. Land prices are set by loose credit.
> Rents are set by wages.
That is incorrect. Loose credit most definitely affects rents, as in more people can now afford to buy real-estate (houses, apartments), that reduces the supply of available places to rent (assuming no new constructions take place, for the sake of the demonstration), and generally speaking a reduced level of supply has been accompanied by higher prices, in this case higher rents.
That is incorrect. Loose credit most definitely affects rents, as in more people can now afford to buy real-estate (houses, apartments), that reduces the supply of available places to rent (assuming no new constructions take place, for the sake of the demonstration), and generally speaking a reduced level of supply has been accompanied by higher prices, in this case higher rents.
Yes, the supply of rental is affected, but the previous poster's point was that demand is anchored by reality (wages) and not speculation (bank loans).
I like how succinct this comment is.
Is there a conclusion on the global movement of rent prices in comparison to house prices?
Is there a conclusion on the global movement of rent prices in comparison to house prices?
Exactly. Inflation is calculated based on a basket of goods that excludes all kinds of expensive and illiquid assets that the average person doesn't buy often or at all.
I guess it's fine if people want to describe that situation as low inflation with an asset bubble. But I think what is actually happening is that, although much of the world now gets to eat well and enjoy consumer goods, all kinds of assets (property, artwork, luxuries and anything requiring rare resources) are moving up and up out of people's reach).
I guess it's fine if people want to describe that situation as low inflation with an asset bubble. But I think what is actually happening is that, although much of the world now gets to eat well and enjoy consumer goods, all kinds of assets (property, artwork, luxuries and anything requiring rare resources) are moving up and up out of people's reach).
Interesting idea, but bear in mind stocks and other investment vehicles also have highest historical prices.
We could consider that the inflation that was supposed to happen with QE ended up just inflating assets prices. But that would still be an overall good thing, because asset prices are not what harm the greatest body of people, nor affect their wages like regular inflation does. People will not be thrown into poverty because apple has historic highs.
In terms of housing, we should look at rental prices more than housing prices. Is that going up as fast as house values? I dont think so.
We could consider that the inflation that was supposed to happen with QE ended up just inflating assets prices. But that would still be an overall good thing, because asset prices are not what harm the greatest body of people, nor affect their wages like regular inflation does. People will not be thrown into poverty because apple has historic highs.
In terms of housing, we should look at rental prices more than housing prices. Is that going up as fast as house values? I dont think so.
>But that would still be an overall good thing, because asset prices are not what harm the greatest body of people
I think it takes a lot of gall to post this, considering that asset prices hurting people is the topic of the thread and the gist of GP's post. I would say it's certainly not an overall good thing; it's good for the landed class and hurts everyone else.
I think it takes a lot of gall to post this, considering that asset prices hurting people is the topic of the thread and the gist of GP's post. I would say it's certainly not an overall good thing; it's good for the landed class and hurts everyone else.
The OP talks about inflation indexes not taking into account house values, and thus somehow not reflecting what the actual situation of the people is.
Inflation typically doesnt take into account investable assets, it just accounts for the requirements of daily living. Rental prices is one of those, housing prices are more tangential. Its reasonable to exclude the last.
> it's good for the landed class and hurts everyone else.
If it were cheaper and more people purchased land, then the landed class would be bigger. There is some paradoxical notion to saying the rules you have favors the 'rich' and they should change so there are more 'rich'.
Inflation typically doesnt take into account investable assets, it just accounts for the requirements of daily living. Rental prices is one of those, housing prices are more tangential. Its reasonable to exclude the last.
> it's good for the landed class and hurts everyone else.
If it were cheaper and more people purchased land, then the landed class would be bigger. There is some paradoxical notion to saying the rules you have favors the 'rich' and they should change so there are more 'rich'.
There is no paradoxical notion there. Expanding the landed class and benefitting the landed class are opposites. Homeownership brings freedom; making freedom accessible is a noble goal, while rewarding only those who already have it is counterproductive. That anyone could believe otherwise smacks of too much time in ivory towers and not enough time in shitty apartment complexes which teach through omission the value of homeownership.
Asset prices rising unsustainably hurts everyone. Almost every depression is preceded by asset bubbles.
Many types of loans are secured by assets, so when those bubbles pop, the loans get called, which depresses asset prices further and further.
Many types of loans are secured by assets, so when those bubbles pop, the loans get called, which depresses asset prices further and further.
Asset bubble != asset inflation.
Bubble implies it has to pop, inflation is just raise in prices overall.
To this moment its unclear if we have a bubble or not.
Bubble implies it has to pop, inflation is just raise in prices overall.
To this moment its unclear if we have a bubble or not.
Notable historical figures who gave the central banking cartels the finger are in the minority. They include interesting mix like Abraham Lincoln, Hitler and Gadaffi.
After Lincoln won they just weasled their way back in.
The Fed can just electronically debit an account and create money out of thin air. However, the power to control the US money supply is a constitutional right of Congress. We should take that back. It should be done via a k-percent algorithm. Get rid of fractional reserve banking while you're at it.
After Lincoln won they just weasled their way back in.
The Fed can just electronically debit an account and create money out of thin air. However, the power to control the US money supply is a constitutional right of Congress. We should take that back. It should be done via a k-percent algorithm. Get rid of fractional reserve banking while you're at it.
> However, the power to control the US money supply is a constitutional right of Congress.
Actually, it isn't. The Fed was created as an end run around the Constitution. The Constitution does not grant this power because of the experience with the Continental Congress and their profligacy at printing money.
> Get rid of fractional reserve banking while you're at it.
Nothing wrong with that. Its excesses are held in check under a free banking system.
Actually, it isn't. The Fed was created as an end run around the Constitution. The Constitution does not grant this power because of the experience with the Continental Congress and their profligacy at printing money.
> Get rid of fractional reserve banking while you're at it.
Nothing wrong with that. Its excesses are held in check under a free banking system.
If I am not mistaken, the right to print and regulate money is explicitly written in the constitution. I did some Googling, and it is in Article 1 Section 8.
>"The Constitution contains only two sections dealing with monetary issues. Section 8 permits Congress to coin money and to regulate its value.
www.let.rug.nl/usa/essays/general/a-brief-history-of-central-banking/money-and-the-constitution.php
>"The Constitution contains only two sections dealing with monetary issues. Section 8 permits Congress to coin money and to regulate its value.
www.let.rug.nl/usa/essays/general/a-brief-history-of-central-banking/money-and-the-constitution.php
Coin money and regulate its value, yes. Print money, no. The distinction is crucial, and the choice of words deliberate. There's a reason why the Fed is a pseudo-private institution, not just another government agency.
I disagree. "Regulate it's value," is unambiguous in meaning.
If you're right, why didn't the government print currency for 120 years, and why did they set up a pseudo-private organization to do it?
Oh come on. We are calling in to question the existence of every single constitutional injustice in the last 120 years here.
Could you explain your last paragraph and why you think it's a good idea?
Milton Friedman did a much better job of this than I could here. I don't agree with him on all things, but there are good reasons behind these ideas.
The fact the Fed's balance sheet swelled to 4.5trillion with free money is just outrageous. Wall St, nor the Fed, can regulate themselves and they their "dual mandate" is financial alchemy at best.
The fact the Fed's balance sheet swelled to 4.5trillion with free money is just outrageous. Wall St, nor the Fed, can regulate themselves and they their "dual mandate" is financial alchemy at best.
> Get rid of fractional reserve banking while you're at it.
And replace it with what? The barter system?
And replace it with what? The barter system?
Normal banks that hold money. 100% reserve banking.
Something Milton Friedman and Paul Krugman agree on, at least at times, is that commercial banks should be like utility companies.
Something Milton Friedman and Paul Krugman agree on, at least at times, is that commercial banks should be like utility companies.
Luckily it's not like that was ever tried before, or we would have some idea of what will happen.
Oh ... wait ...
https://www.foreignaffairs.com/articles/1932-01-01/crisis-go...
The problem, at its root, is that we have large parts of the world with negative trade balances. What that boils down to is that there are large parts of the world that don't have any economic use but get included anyway.
Those parts represent interruptions to an economy that only works long-term if it's a circle.
Now just so we're clear: the problem is overcapacity, and a demand-limited economy. The solution is obviously not to cut parts out and lower demand further (why not ? Because anyone doing that will get outcompeted in a credit-based economy and therefore doing this is not a Nash equilibrium).
Oh ... wait ...
https://www.foreignaffairs.com/articles/1932-01-01/crisis-go...
The problem, at its root, is that we have large parts of the world with negative trade balances. What that boils down to is that there are large parts of the world that don't have any economic use but get included anyway.
Those parts represent interruptions to an economy that only works long-term if it's a circle.
Now just so we're clear: the problem is overcapacity, and a demand-limited economy. The solution is obviously not to cut parts out and lower demand further (why not ? Because anyone doing that will get outcompeted in a credit-based economy and therefore doing this is not a Nash equilibrium).
>Normal banks that hold money. 100% reserve banking.
Loans and Home mortgages would be impossibly difficult to get. You do realize that when we get a loan from the bank, the loan amount minus the down-payment exists only electronically? The balance is supposed to be wiped out if we repay the loan but that never happens.
I am not saying fractional reserve banking is perfect but what are the alternatives?
Loans and Home mortgages would be impossibly difficult to get. You do realize that when we get a loan from the bank, the loan amount minus the down-payment exists only electronically? The balance is supposed to be wiped out if we repay the loan but that never happens.
I am not saying fractional reserve banking is perfect but what are the alternatives?
Nothing is for free. There are no magic tricks that create free money. If you think about this, home loans (and moreso the banking empires) are subsidized by the average worker and money-holder.
However, with a k-percent rule keeping inflation at 0.5-1% it would not be that much harder to get financing. I do agree we need monetary growth to avoid commodity money. In other words, we don't want people holding money because it grows in value--we want people to have some incentive to invest it.
If you want to give people free money to buy houses, just give them free money. Wall St & the Fed are a criminal middleman profiting off everyone else's expense.
The real question is how do you fairly grow the money supply if we cut out the Fed? Maybe finance national healthcare this way. Hospitals could issue currency and buy securities on the open market. We could even restrict it to treasuries to subsidize the national debt like we do now.
However, with a k-percent rule keeping inflation at 0.5-1% it would not be that much harder to get financing. I do agree we need monetary growth to avoid commodity money. In other words, we don't want people holding money because it grows in value--we want people to have some incentive to invest it.
If you want to give people free money to buy houses, just give them free money. Wall St & the Fed are a criminal middleman profiting off everyone else's expense.
The real question is how do you fairly grow the money supply if we cut out the Fed? Maybe finance national healthcare this way. Hospitals could issue currency and buy securities on the open market. We could even restrict it to treasuries to subsidize the national debt like we do now.
If money were an infinite resource it would have no value. Sure, governments have the ability to print more but they are constrained by inflation targets. And sure, more liquidity was put into the markets but that's because the markets had no liquidity and we were on the brink of financial disaster and deflation was on the verge of occurring. In deflationary events no one buys anything because the price tomorrow is cheaper then the price today so everyone waits to buy while businesses are unable to move their products and tons of people lose their jobs.
There are other circumstances at work here then more money in circulation, such as land use restrictions, building codes, nimbyism, credit costs/restrictions, tax policies, etc. If investors can build housing and make money they will certainly do it. It's not just the supply of money, but also the supply/demand of a product that effects prices.
There are other circumstances at work here then more money in circulation, such as land use restrictions, building codes, nimbyism, credit costs/restrictions, tax policies, etc. If investors can build housing and make money they will certainly do it. It's not just the supply of money, but also the supply/demand of a product that effects prices.
>In deflationary events no one buys anything because the price tomorrow is cheaper then the price today
Computer prices have been rapidly deflating since before I was born, but I've bought several computers. Deflation only prevents purchases when the savings from waiting outweigh the cost of not having the item.
Computer prices have been rapidly deflating since before I was born, but I've bought several computers. Deflation only prevents purchases when the savings from waiting outweigh the cost of not having the item.
>Deflation only prevents purchases when the savings from waiting outweigh the cost of not having the item.
reply
Very true, but it simply is a semantic gap. I suspect(not know) most economics students are taught 'deflationary scenario' or 'deflation' is when savings from waiting outweigh (cost of not having the item or benefit of having the item).
Very true, but it simply is a semantic gap. I suspect(not know) most economics students are taught 'deflationary scenario' or 'deflation' is when savings from waiting outweigh (cost of not having the item or benefit of having the item).
When someone says "no one buys anything", deflation proponents always twist that as if it's meant literally. The economy doesn't halt when there is a deflation. It just slows down, people buy less, then, because of the low sales, companies lay off employees, so people buy even less...and so on.
"It just slows down, people buy less, then, because of the low sales, companies lay off employees, so people buy even less...and so on"
.. which frees up resources into products/industries people value more. Why is that a bad thing vs people overspending a lot to buy things they might not need? To much deflation is bad but how about a stable money supply with very low (if any) injection of money by the government?
.. which frees up resources into products/industries people value more. Why is that a bad thing vs people overspending a lot to buy things they might not need? To much deflation is bad but how about a stable money supply with very low (if any) injection of money by the government?
You can easily see how well the reality matches your forecasts by going back to 2007. Did the masses of unemployed people seem happy to be freed from the burden of "overspending"?
> how about a stable money supply with very low (if any) injection of money by the government?
Majority of money supply in existence is some form of debt. I have $1000 cold hard cash, I put it in a bank and the bank then lends it someone else. Now there are $2000 in existence. Central banks don't and can't control this process directly. This is the vast majority of money out there. The amount that CBs prints is really tiny in comparison. In fact they are aiming at exactly what you suggest - some relatively low inflation rate but they tend to overshoot because they can't get the precise inflation rate they want and undershooting makes the process much harder to control. The fact that money is debt is exactly the reason you're now seeing inflation in US, even though the Fed stopped printing money long ago. Now they'll be starting to reduce money supply but you'll continue to see inflation rise until some sort of equilibrium is reached or (more likely) next bust comes. The money printing is supposed to act as a sort of confidence boost in recession/depressions but now that confidence is back, the money supply is growing and growing even though money printing has stopped.
> how about a stable money supply with very low (if any) injection of money by the government?
Majority of money supply in existence is some form of debt. I have $1000 cold hard cash, I put it in a bank and the bank then lends it someone else. Now there are $2000 in existence. Central banks don't and can't control this process directly. This is the vast majority of money out there. The amount that CBs prints is really tiny in comparison. In fact they are aiming at exactly what you suggest - some relatively low inflation rate but they tend to overshoot because they can't get the precise inflation rate they want and undershooting makes the process much harder to control. The fact that money is debt is exactly the reason you're now seeing inflation in US, even though the Fed stopped printing money long ago. Now they'll be starting to reduce money supply but you'll continue to see inflation rise until some sort of equilibrium is reached or (more likely) next bust comes. The money printing is supposed to act as a sort of confidence boost in recession/depressions but now that confidence is back, the money supply is growing and growing even though money printing has stopped.
It just slows down, people buy less, then, because of the low sales, companies lay off employees, so people buy even less...and so on.
Good. I think the world could do with less consumerism.
Good. I think the world could do with less consumerism.
Could it also do with more angry underemployed people?
Yes, definitely. I think our current consumerism is unsustainable and will either kill or mostly ruin us and the planet. More unemployed people will either lead to us realising we don't need to constantly be consuming more, or revolution into a more sustainable society. I'd take either over what we have now.
The problem is the rules are made up as we go along. Money is infinite if we want it to be infinite... at the minute it's finite up until a debt ceiling is hit. And as we've seen before, we just keep raising that ceiling if it looks like we'll run out of money and can't afford to keep society operating properly.
People don't have a say in who or what is 'saved' by printing money. Or where the new money goes. A handful of people decide, most of whom are in a very comfortable position in life and quite often have vested interests in maintaining the status quo. After all, it works for them and got them to where they are, so very few people would do something to jeopardize their own wealth / position. How many politicians own more than one property for example? Are they really going to voluntarily introduce measures to lower property prices in the interests of the younger, less well off people / families?
I agree an entirely deflationary monetary system isn't the answer however the more you print money, the more you're effectively saying "It's no big deal if you get in to debt, we'll just create more money to clear it like we did the last time and the time before that".
People don't have a say in who or what is 'saved' by printing money. Or where the new money goes. A handful of people decide, most of whom are in a very comfortable position in life and quite often have vested interests in maintaining the status quo. After all, it works for them and got them to where they are, so very few people would do something to jeopardize their own wealth / position. How many politicians own more than one property for example? Are they really going to voluntarily introduce measures to lower property prices in the interests of the younger, less well off people / families?
I agree an entirely deflationary monetary system isn't the answer however the more you print money, the more you're effectively saying "It's no big deal if you get in to debt, we'll just create more money to clear it like we did the last time and the time before that".
Money isn't infinite, fiat currency is a token of future tax raising power.
The solution to the rich hording everything is taxation and redistribution.
The solution to the rich hording everything is taxation and redistribution.
> The solution to the rich hording everything is taxation and redistribution.
How did that work out in countries with almost 100% tax and full distribution policies?
How did that work out in countries with almost 100% tax and full distribution policies?
The lesson is that extremes and monocultures are generally failures. Moderate and diverse economies are probably better fit to long term success; in the short run ideology can generate massive benefits - like war communism did. I would argue that many of the economies of the developed world have swung far to far toward plutocracy and injustice.
Mostly, they laundered their money in the United States!
Surely there is middle ground before we get to 100% taxation?
"I don't get it, people like drinking water but they don't like drowning"
"I don't get it, people like drinking water but they don't like drowning"
I'd say that if the solution to the problem, given unlimited solutions, made the problem worse, then it will also fail in smaller applications.
"The only reason I am in debt, is because i can't ask for a big enough loan"
"The only reason I am in debt, is because i can't ask for a big enough loan"
> We've had unprecedented global quantitative easing over the past decade, so it's quite natural that house prices globally will meet and surpass all time highs.
QE is not "printing money". It is exchange of interest bearing assets from the financial assets like government bonds from the private sector, for non interest bearing assets(cash). The net financial assets(money) owned by the private sector remain exactly the same, so there is no direct correlation with inflation.
QE is a strategy to manipulate/lower long term interest rates by changing the asset portfolio of the private sector. Traditionally, central banks only directly controlled short term interest rates. However, in the wake of the financial crisis, credit markets were still tight despite central banks reducing overnight interest rates to zero(the "liquidity trap"). Since you really cant go (much) lower than zero, new techniques were needed to stimulate the economy.
QE does not (directly) lead to inflation, as is further reinforced by the West post 2008 or even Japan in the 2000s. Inflation has consistently stopped short of target during QE. The precise changes to the risk portfolio of the private sector, along with the conditions of the economy means QE can have either inflationary or even deflationary effects.
https://www.princeton.edu/ceps/workingpapers/204blinder.pdf
QE is not "printing money". It is exchange of interest bearing assets from the financial assets like government bonds from the private sector, for non interest bearing assets(cash). The net financial assets(money) owned by the private sector remain exactly the same, so there is no direct correlation with inflation.
QE is a strategy to manipulate/lower long term interest rates by changing the asset portfolio of the private sector. Traditionally, central banks only directly controlled short term interest rates. However, in the wake of the financial crisis, credit markets were still tight despite central banks reducing overnight interest rates to zero(the "liquidity trap"). Since you really cant go (much) lower than zero, new techniques were needed to stimulate the economy.
QE does not (directly) lead to inflation, as is further reinforced by the West post 2008 or even Japan in the 2000s. Inflation has consistently stopped short of target during QE. The precise changes to the risk portfolio of the private sector, along with the conditions of the economy means QE can have either inflationary or even deflationary effects.
https://www.princeton.edu/ceps/workingpapers/204blinder.pdf
and what happens when you allow the land you live on to be traded as an asset in the global marketplace, suddenly your not competing against your neighbor for that big house down the street, your competing against 8 billion. Land should be for locals only (exception the business district).
The problem with property is that property uniquely spans the personal, the deeply economic (interest rates are used to mediate inflation and growth), deeply emotional (I own this), usually the single most important asset for the vast majority of people, and one where all these factors compete.
The problem with only locals buying property are many, but mainly that prices stagnate. That is not bad per se, but there is a voting sector that doesn't want price stagnation (older people basically). Governments in Australia have used foreign investment rules as a kind of secondary economic switch to keep prices going up, to the benefit of some, the chagrin of others, and ultimately maintain a status quo that benefits politicians.
It's a tough problem, property prices, and one with no clear right or wrong answer.
The problem with only locals buying property are many, but mainly that prices stagnate. That is not bad per se, but there is a voting sector that doesn't want price stagnation (older people basically). Governments in Australia have used foreign investment rules as a kind of secondary economic switch to keep prices going up, to the benefit of some, the chagrin of others, and ultimately maintain a status quo that benefits politicians.
It's a tough problem, property prices, and one with no clear right or wrong answer.
There may be no clear and complete answer, but there is one very robust partial answer. Land Value Taxation makes a lot of sense and appears to function as more or less as intended where it is adopted. There are many other factors involved, but moving away from unbalanced subsidies like the mortgage interest deduction toward systematically appropriate taxation could help a great deal.
How does printing money make the rich richer? Isn't it exactly the opposite?
Rich people borrow lots of money and buy assets.
Look at Donald Trump’s son in law as an example — I use him not to make a political point but because there’s alot of public information out there. He uses cheap capital to buy lots of cash flow in the form of apartment complexes. Being deeply in debt means that his liabilities get discounted by inflation, while inflation allows his company to escalate rents.
If you have cash or equity now, the smartest move you can to make is to borrow as much as you can afford and buy assets like real property or businesses that generate cash flow. Businesses like laundromats are probably more valuable than tech investments in the next decade.
Look at Donald Trump’s son in law as an example — I use him not to make a political point but because there’s alot of public information out there. He uses cheap capital to buy lots of cash flow in the form of apartment complexes. Being deeply in debt means that his liabilities get discounted by inflation, while inflation allows his company to escalate rents.
If you have cash or equity now, the smartest move you can to make is to borrow as much as you can afford and buy assets like real property or businesses that generate cash flow. Businesses like laundromats are probably more valuable than tech investments in the next decade.
The real winners of classic inflation are debt holders. The high inflation in the 70's contributed enormously to a generation that purchased a home and paid a lot less in real terms.
the rich are not in cash, they are in assets. Workers lose out under inflation (and I mean real inflation not some bullshit figure the state concocts).
With salaries not rising enough to keep up with inflation, the money ends up at the top.
Housing prices would rise even if money wasn't being printed. Because when I buy a house, the money doesn't disappear, it goes to the seller.
Imagine there was only one bank, we'll call it Banky Mc Investment Inc. or BMI.
Fred wants to buy a house. That house "costs" $1 trillion dollars. Bob owns the house and decides to sell.
Fred goes to BMI and says, "can I have a loan for $1 trillion?" BMI says "sure thing Fred" and BMI transfers "$1 trillion" to Bob's account. BMI then goes to Bob, and says "hey Bob, it looks like you've got a lot of cash in your account. Would you like to invest it in the BMI morgage investment pool, ultra low risk, backed by valuable real-estate? Bob says "sure thing!" and BMI's books balance. Sure, Fred now has a lot of debt, but there is no reason why this couldn't happen, even with a "limited money supply".
You don't need cash to put IOUs on the books.
Imagine there was only one bank, we'll call it Banky Mc Investment Inc. or BMI.
Fred wants to buy a house. That house "costs" $1 trillion dollars. Bob owns the house and decides to sell.
Fred goes to BMI and says, "can I have a loan for $1 trillion?" BMI says "sure thing Fred" and BMI transfers "$1 trillion" to Bob's account. BMI then goes to Bob, and says "hey Bob, it looks like you've got a lot of cash in your account. Would you like to invest it in the BMI morgage investment pool, ultra low risk, backed by valuable real-estate? Bob says "sure thing!" and BMI's books balance. Sure, Fred now has a lot of debt, but there is no reason why this couldn't happen, even with a "limited money supply".
You don't need cash to put IOUs on the books.
you're correct. And that's why the fractional reserve lending system creates problems.(To be fair, it creates more credit and risk-taking behaviour).
Pronouncements like this come out all the time in Australia, for at least the last 7 years. This is an example of a headline that can't lose - you are telling people that can't afford a house what they want to hear, at the same time spreading fear amongst those that do own property, and eventually you'll be 'right'.
The problem primarily exists in Sydney and Melbourne. Melbourne in particular is experiencing high population growth, and the city is already sprawling, without the ability to dramatically increase housing density around the central city. Growth in land prices is likely to continue for a while because of this, perhaps not at the same high rate. Apartment prices are more at risk. The ridiculous price growth in property over the last 10 years has created many asset rich baby boomers, who will continue to invest in property and transfer wealth to their children. It certainly is nothing like the sub prime loan crisis - Australian banks have remained quite selective in giving out home loans.
The problem primarily exists in Sydney and Melbourne. Melbourne in particular is experiencing high population growth, and the city is already sprawling, without the ability to dramatically increase housing density around the central city. Growth in land prices is likely to continue for a while because of this, perhaps not at the same high rate. Apartment prices are more at risk. The ridiculous price growth in property over the last 10 years has created many asset rich baby boomers, who will continue to invest in property and transfer wealth to their children. It certainly is nothing like the sub prime loan crisis - Australian banks have remained quite selective in giving out home loans.
Australian here - I agree. HN must realise that this story gets trotted out basically ever week on prime time TV.
And it's true that some people have been really stupid financing multiple properties off of each other and trying to live off of rentals then having it all fall down. But that's hardly more than a tiny minority of idiots.
Furthermore the Australian property market really has at least two completely different levels. You've got Sydney with multi-million dollar hovels. And then you've got pretty much the rest of the country which is reasonably priced. There might be a third one which is "CBD apartments" which are also crazily high priced - but if you live there you're an idiot too.
Guess where most of the media is? Guess where most of the focus on pricing is? Yes... it's Sydney.
Now it's true our houses are relatively expensive. I watch some American shows where they're house-hunting and get pretty much mansions for 1/4 of the price of a normal house here, but, I suspect those are in semi-remote places.
But is it a party? Not really. Is it over? Not by a long shot. You can't trust any of this news.
Of course if you're buying a house way beyond your budget, or buying multiple houses, you're an idiot and get what you deserve. Also there's always the risk you do everything right but then lose your job, run out of savings, and can't make repayments - but we're all in that position.
And it's true that some people have been really stupid financing multiple properties off of each other and trying to live off of rentals then having it all fall down. But that's hardly more than a tiny minority of idiots.
Furthermore the Australian property market really has at least two completely different levels. You've got Sydney with multi-million dollar hovels. And then you've got pretty much the rest of the country which is reasonably priced. There might be a third one which is "CBD apartments" which are also crazily high priced - but if you live there you're an idiot too.
Guess where most of the media is? Guess where most of the focus on pricing is? Yes... it's Sydney.
Now it's true our houses are relatively expensive. I watch some American shows where they're house-hunting and get pretty much mansions for 1/4 of the price of a normal house here, but, I suspect those are in semi-remote places.
But is it a party? Not really. Is it over? Not by a long shot. You can't trust any of this news.
Of course if you're buying a house way beyond your budget, or buying multiple houses, you're an idiot and get what you deserve. Also there's always the risk you do everything right but then lose your job, run out of savings, and can't make repayments - but we're all in that position.
What is "CBD apartments"? It just turns up a development in the Big Easy for me when I search it.
Edit: Not sure why an honest question after a google gets a down vote.
Edit: Not sure why an honest question after a google gets a down vote.
Digging up my school geography from memory I think it means Central Business Distrct?
>And then you've got pretty much the rest of the country which is reasonably priced.
>I watch some American shows where they're house-hunting and get pretty much mansions for 1/4 of the price of a normal house here, but, I suspect those are in semi-remote places.
No they are not semi-rural places. They are literally 1/4th the price. I grew up in Logan, which is outside of Brisbane. My parents house was sold for $700k. It takes about 1hr 15min to get to the city in peak hour, and public transport isn't really viable.
$700k is about 7.5x the average income. Homes used to be larger, within 30 minutes drive of the city during peak hour, and 3x average income. Taking 7 years to just save for a deposit and taking out a 600k loan and paying it off over decades is not affordable in any language.
No they are not semi-rural places. They are literally 1/4th the price. I grew up in Logan, which is outside of Brisbane. My parents house was sold for $700k. It takes about 1hr 15min to get to the city in peak hour, and public transport isn't really viable.
$700k is about 7.5x the average income. Homes used to be larger, within 30 minutes drive of the city during peak hour, and 3x average income. Taking 7 years to just save for a deposit and taking out a 600k loan and paying it off over decades is not affordable in any language.
There are some analysts and economists I've read who are looking at the situation and warning that there is a lot more fraudulent lending than most would think. On an anecdotal level I've also heard more than a few people say they it was hinted by banks that they could put a bigger number in the 'income' box and borrow more money.
On that, it will be interesting what would come out if a future royal commission into the banking sector happens.
But even if not, it wouldn't matter. You can have the best capital adequacy in the world, and have only lent to people with rock solid ability to service their loans - but you have a real problem if there's a drop in prices and you have hundreds of thousands of people with negative equity on once-million dollar assets.
On that, it will be interesting what would come out if a future royal commission into the banking sector happens.
But even if not, it wouldn't matter. You can have the best capital adequacy in the world, and have only lent to people with rock solid ability to service their loans - but you have a real problem if there's a drop in prices and you have hundreds of thousands of people with negative equity on once-million dollar assets.
>On an anecdotal level I've also heard more than a few people say they it was hinted by banks that they could put a bigger number in the 'income' box and borrow more money.
There is at least one survey showing that liar loans are common in Australia: https://www.domain.com.au/news/australian-housing-market-bui... About 500bn mortgages are based on inaccurate/false information, 1,100bn are 'correct'. Note that these numbers are estimates because they are based on surveys, Australia's banking system does not need to check this.
Liar loans were a big factor in the US' started financial crisis: https://www.nytimes.com/2015/02/13/upshot/how-mortgage-fraud...
There is at least one survey showing that liar loans are common in Australia: https://www.domain.com.au/news/australian-housing-market-bui... About 500bn mortgages are based on inaccurate/false information, 1,100bn are 'correct'. Note that these numbers are estimates because they are based on surveys, Australia's banking system does not need to check this.
Liar loans were a big factor in the US' started financial crisis: https://www.nytimes.com/2015/02/13/upshot/how-mortgage-fraud...
No. I've had banks throw money at me... to the point where he knew I couldn't extend myself to afford repayments, so he bumped my rental's rent to above market prices in order to approve the loan! I've heard this confirmed from others too.
Gobsmacked... lucky I walked away :/
Gobsmacked... lucky I walked away :/
"This is an example of a headline that can't lose"
News to sad to fail? Because no one can ignore bad news forever...
News to sad to fail? Because no one can ignore bad news forever...
>Pronouncements like this come out all the time in Australia, for at least the last 7 years. This is an example of a headline that can't lose - you are telling people that can't afford a house what they want to hear, at the same time spreading fear amongst those that do own property, and eventually you'll be 'right'.
Well no, it is true. A shock to the economy will obviously create a major effect in high-cost structure societies compared to low cost structure societies. That is what I like about some places like China. Here in Australia, people just think "well my wage pays for it so who cares". They don't see how it exposes you when you suddenly don't get the wage or when you want to do something other than get paid a wage.
What is not true is that this is some kind of bubble due to house prices and wages being out of sync. In reality, house prices can continue to rise even if wages don't rise simply because the definition of a house is not a constant. A house becomes a small house, becomes an apartment. You can keep creating affordable housing simply by increasing density.
>The problem primarily exists in Sydney and Melbourne.
and Brisbane and surrounding areas, which encompasses most of Australia's population.
>who will continue to invest in property and transfer wealth to their children
which creates a massive divide.
Well no, it is true. A shock to the economy will obviously create a major effect in high-cost structure societies compared to low cost structure societies. That is what I like about some places like China. Here in Australia, people just think "well my wage pays for it so who cares". They don't see how it exposes you when you suddenly don't get the wage or when you want to do something other than get paid a wage.
What is not true is that this is some kind of bubble due to house prices and wages being out of sync. In reality, house prices can continue to rise even if wages don't rise simply because the definition of a house is not a constant. A house becomes a small house, becomes an apartment. You can keep creating affordable housing simply by increasing density.
>The problem primarily exists in Sydney and Melbourne.
and Brisbane and surrounding areas, which encompasses most of Australia's population.
>who will continue to invest in property and transfer wealth to their children
which creates a massive divide.
House prices in Australia are insane. We have not had a recession for almost 30 years and most people here under 40 have no idea what a recession means. When this party ends the hangover is going to be horrendous.
I still remember driving home one day from work during the GFC, and was completely shocked that (from memory) every second to third house was for sale.
With a lot of hot money going around Melbourne these days, low interest rates, and a daily influx of Chinese investors, it's a bubble that's inevitable going to implode.
...on Chinese investors - I used to be on Williams street by 6am every day, and without fail there two busloads of Chinese investors ready to look at the new apartments being built there.
The game now is, which side dries up first - supply of houses/appartments, or the demand of Chinese investors.
With a lot of hot money going around Melbourne these days, low interest rates, and a daily influx of Chinese investors, it's a bubble that's inevitable going to implode.
...on Chinese investors - I used to be on Williams street by 6am every day, and without fail there two busloads of Chinese investors ready to look at the new apartments being built there.
The game now is, which side dries up first - supply of houses/appartments, or the demand of Chinese investors.
Variations of this headline have been running for years now, so I don’t really think this one is going to be any more accurate regarding timing than any of the other predictions. There seems to be an un-ending political will-power (from both sides of politics and at both the state and federal levels) to continue housing policies that predate Australia’s last recession, and to offer only stop-gap measures to get young people back into the housing market or to maintain prices.
I live in a rental, which is being rented out below what the market rate would be, thanks to an extent to negative gearing. There are at least half a dozen building sites in my street, which is about 20km from the centre of Melbourne. The median house price has soared this year to well over AU$1m (units are more than half that). We get at least a dozen flyers each week, written in both Chinese and English, advertising that there are buyers in the area with budgets up to AU$2m or that houses have sold for more than AU$1m.
When the bubble does burst, there’s no doubt that it will be disastrous in parts of Melbourne and Sydney. It’s unclear whether there is the capacity to make up for a glut in new housing projects with public infrastructure projects. That’s not to mention the enormous hit that huge numbers of home owners will take when their homes drop in value.
No doubt the post-mortem will be quite damning for many policy makers.
Edit: ‘fraction’ was inaccurate, and it’s academic as to the extent negative gearing affects rents.
I live in a rental, which is being rented out below what the market rate would be, thanks to an extent to negative gearing. There are at least half a dozen building sites in my street, which is about 20km from the centre of Melbourne. The median house price has soared this year to well over AU$1m (units are more than half that). We get at least a dozen flyers each week, written in both Chinese and English, advertising that there are buyers in the area with budgets up to AU$2m or that houses have sold for more than AU$1m.
When the bubble does burst, there’s no doubt that it will be disastrous in parts of Melbourne and Sydney. It’s unclear whether there is the capacity to make up for a glut in new housing projects with public infrastructure projects. That’s not to mention the enormous hit that huge numbers of home owners will take when their homes drop in value.
No doubt the post-mortem will be quite damning for many policy makers.
Edit: ‘fraction’ was inaccurate, and it’s academic as to the extent negative gearing affects rents.
I doubt negative gearing affects the rental rate much. Possibly in the single digit percent kind of area, but nothing like what 'a fraction' implies. Statistically, rental rates have an extremely strong correlation to vacancy rates. Although there are claims that when negative gearing was briefly abolished, rents went up, they actually went down in many markets and up in a few, but all of them were just following vacancy rates like they always have. Part of this may have been that it wasn't abolished for long enough to see the effect of the reduction in new stock encouraged by negative gearing, but it's pretty terrible at doing that (90% of NG investment is in existing property) so that probably wouldn't have been much.
The yields are low because rents have to be affordable to most of the population, whereas banks will lend ridiculous amounts of money to speculators for houses, fuelling the bubble.
All in all, NG (in concert with the capital gains tax discount) mostly encourages speculation, artificially increasing house prices, so it should be at least restricted to new-builds only.
The yields are low because rents have to be affordable to most of the population, whereas banks will lend ridiculous amounts of money to speculators for houses, fuelling the bubble.
All in all, NG (in concert with the capital gains tax discount) mostly encourages speculation, artificially increasing house prices, so it should be at least restricted to new-builds only.
You’re probably right in general re: negative gearing on rents (I’ve edited my comment).
> Australia’s obsession with property is firmly entrenched in the nation’s economy and psyche..
The article's quote seems to be accurate from my anecdote. I visited Sydney recently, and the tour guide taking me to the blue mountains started his trip by driving through neighborhoods to point out the ridiculous home prices. I thought it was strange, but then everyone I met was eager to discuss the home prices, or asked me the price of my home (in the US). It seemed the housing market is on everyone's minds.
The article's quote seems to be accurate from my anecdote. I visited Sydney recently, and the tour guide taking me to the blue mountains started his trip by driving through neighborhoods to point out the ridiculous home prices. I thought it was strange, but then everyone I met was eager to discuss the home prices, or asked me the price of my home (in the US). It seemed the housing market is on everyone's minds.
— When the market is on everyone’s mind, it’s time to sell.
Joseph P. Kennedy, 1929 (paraphrased)
Joseph P. Kennedy, 1929 (paraphrased)
I want to say that in argentina, housing prices doubled in a few years up to 2009. Argentina housing was not hit by the Great Recession because we had no debt associated with housing. Housing prices didnt drop at all, and they were still very high by people's income.
I predicted that prices would drop, the same way people predict now that housing prices will drop. 8 years in, and prices grew organically from that point.
It is exceedingly difficult to lower housing prices without a direct hit.
I predicted that prices would drop, the same way people predict now that housing prices will drop. 8 years in, and prices grew organically from that point.
It is exceedingly difficult to lower housing prices without a direct hit.
Yep. I bought in a newer area, quite a distance from the city. I paid about $760,000 for it. It's not huge, and apparently after 2 years it's close to $840,000. That's insane.
That's an annualized growth rate of 5.13%. How exactly is that insane? If you assume inflation is 2-3% the real rate of return is ~2.5%.
The YTD return for the S&P 500 is 18.6%. Now that's insane.
The YTD return for the S&P 500 is 18.6%. Now that's insane.
You are discounting the leverage of home loans. With 100k down payment you get 5% of 1 million dollars returns which is 50k a year or 50% growth of your investment
The last year for S&P has been tremendous.
I truly wonder in this age of high asset prices, which assets are relatively best. Stocks won the last couple of years but after that
I truly wonder in this age of high asset prices, which assets are relatively best. Stocks won the last couple of years but after that
Matt Barrie (founder & CEO of freelancer.com) wrote a far lengthier and more detailed essay on this a week or two ago, which has kicked off this latest round of navel-gazing: https://medium.com/@matt_11659/matt-barrie-australias-econom...
Be warned, it's a long read - but I think he's basically right.
Be warned, it's a long read - but I think he's basically right.
That's a lot of words to say that Australia is affected with terminal Dutch disease
On balance however, what exactly would you expect Australia to offer the world better than anywhere else?
On balance however, what exactly would you expect Australia to offer the world better than anywhere else?
Australia's house prices are skewed badly by Sydney's house prices. Sydney's is unfortunately roughly one-quarter of the total Australian housing market.
Physically, Sydney is a very long narrow strip squeezed between the mountains and the sea. The poulation of Sydney is constantly expanding. To expand the population, you need to build further and further away from the CBD. Eventually, the commute becomes up to four hours per day. Eliminating that commute puts a lot of demand pressure on the inner Sydney suburbs, and consequently extremely high housing prices.
Melbourne is not quite as constrained physically, so prices there are about 25% lower. But commute times are rising rapidly.
Away from Sydney and Melbourne (where JUST TWO housing markets make up 40% of the Australian housing market) housing prices are much more 'normal'.
For a US analogy, imagine if a quarter of all US houses were trying to squeeze into New York.
Physically, Sydney is a very long narrow strip squeezed between the mountains and the sea. The poulation of Sydney is constantly expanding. To expand the population, you need to build further and further away from the CBD. Eventually, the commute becomes up to four hours per day. Eliminating that commute puts a lot of demand pressure on the inner Sydney suburbs, and consequently extremely high housing prices.
Melbourne is not quite as constrained physically, so prices there are about 25% lower. But commute times are rising rapidly.
Away from Sydney and Melbourne (where JUST TWO housing markets make up 40% of the Australian housing market) housing prices are much more 'normal'.
For a US analogy, imagine if a quarter of all US houses were trying to squeeze into New York.
That’s a pretty small skyline for a city where the only way to build is outwards. Sure you’re not forgetting an axis?
There are cultural issues at play there which will take quite some time to overcome. High rises in Sydney are popping up around train stations now, but the vast majority of the metropolitan region's land area is taken up by single or double-storey family homes with yards. Pretty much every new high-rise development in these sorts of areas is met with substantial resistance. I don't blame them either - after living in medium-density places in Europe for a few years, I'm sick of it, and want my own house.
The problem with Australia is that too little thought was given to making viable cities outside of the state capitals. I would love to live in a smaller town but my partner needs a major STEM research university to work at. Europe has such universities in small towns, but Australia does not. Everything is too concentrated in the capitals.
The problem with Australia is that too little thought was given to making viable cities outside of the state capitals. I would love to live in a smaller town but my partner needs a major STEM research university to work at. Europe has such universities in small towns, but Australia does not. Everything is too concentrated in the capitals.
I figured. But it's important to remember that the problems that come with sprawl (commute time, environmental issues, high prices when you run out of room to sprawl into) are problems we choose because we judge mid- and high-rise development to be even worse.
It's a good idea to be critical, and to encourage others to be critical, about whether that really makes sense.
This meme that you can't grow except through sprawl is pernicious. Most cities are choosing to leave options on the table.
It's a good idea to be critical, and to encourage others to be critical, about whether that really makes sense.
This meme that you can't grow except through sprawl is pernicious. Most cities are choosing to leave options on the table.
ANU? Small town, excellent STEM programs.
ANU is likely the best compromise option for us at the moment, yeah. All my friends and family are in Sydney, so it's not too far.
Though even as a Sydney-sider, I don't consider Canberra to be a small town. Not after living in German university towns for the last 5 years with pops <150k.
Having said all that, Canberra is an example of how Australia has (once) planned out a charter city and had it succeed. However I am not sure we can do it again without the federal government being as deeply committed as it was in overseeing its own future seat.
Though even as a Sydney-sider, I don't consider Canberra to be a small town. Not after living in German university towns for the last 5 years with pops <150k.
Having said all that, Canberra is an example of how Australia has (once) planned out a charter city and had it succeed. However I am not sure we can do it again without the federal government being as deeply committed as it was in overseeing its own future seat.
I wouldn't call housing in Adelaide "normal" and I imagine the situation in other capitals is similar, even if they're not as extreme as Sydney and Melbourne. The market is overheated. Almost every house in my area is refusing to list a price because the agents could get 15-35% more than they might've guessed a few months ago.
I'd hate to be trying to buy right now.
I'd hate to be trying to buy right now.
What I find most amazing about this is Australia being the 10th least population dense country in the world [https://simple.wikipedia.org/wiki/List_of_countries_by_popul...].
It's very interesting to ponder how our proclivity of huddling together in tight cities can cause such anomalies.
It's very interesting to ponder how our proclivity of huddling together in tight cities can cause such anomalies.
Affordable housing is high density housing, while the majority of Australian cities are suburbs with low density, mostly detached single houses, often with a garden.
For any given 'feature' in a suburb (shopping centre etc.) the houses in walking distance will have a higher value. If you have several multi-family homes or even towers you have a large supply of walking-distance-dwellings. If you have a bunch of single-family houses (the common thing in Australia) then you have low supply.
In other words, Australia tries to huddle together as least as possible which causes many weird anomalies (don't get me started on quality of life/walkable suburbs/rise of US-style drive-everywhere-life with increased obesity/etc)
For any given 'feature' in a suburb (shopping centre etc.) the houses in walking distance will have a higher value. If you have several multi-family homes or even towers you have a large supply of walking-distance-dwellings. If you have a bunch of single-family houses (the common thing in Australia) then you have low supply.
In other words, Australia tries to huddle together as least as possible which causes many weird anomalies (don't get me started on quality of life/walkable suburbs/rise of US-style drive-everywhere-life with increased obesity/etc)
No need to ponder, its very simple, people would rather not live in the desert.
There's plenty of land in Australia which is absolutely not desert. Also there are cities built in deserts these days.
There is plenty of land that is not desert, but the majority is desert.
Any stat comparing population size with land mass is misleading. Australia is hot, 300km off the coast and you’re in drought territory. Go in further and you won’t last a day in the sun without shade and water.
It’s not the US, there are towns in the outback, the majority choose not to live there. People will ordinarily group together in a single area where jobs, infrastructure and general quality of living are high.
Any stat comparing population size with land mass is misleading. Australia is hot, 300km off the coast and you’re in drought territory. Go in further and you won’t last a day in the sun without shade and water.
It’s not the US, there are towns in the outback, the majority choose not to live there. People will ordinarily group together in a single area where jobs, infrastructure and general quality of living are high.
Some of the fastest growing US cities are in the desert. However, there is (sort of) water available for those. (Water supply in the southwest is a major issue though.) I assume inland Australia would have bigger issues with water supply as they don't have a large mountain range draining into the interior.
Well, the vast majority of Australia is the Outback, which people don't really want to live in.
Take a walk on the wild-side around West End, Brisbane, where I live. Factory-city has become apartment city:
https://www.google.com.au/maps/@-27.4845284,152.9998144,3a,6...
What you can see there is all the construction going on say six months ago. When I strolled around last week, every apartment building had "For rent" signs out the front. Typical rents seem to be about $500 per week for a two bedroom apartment. The main attraction is the proximity to the CBD. But will they be filled? Perhaps Brisbane's typical 1 hr commute into the CBD will motivate people to move here. I doubt anyone knows.
Having recently returned to Australia after a few years abroad, the state of the nation is on a terrifying precipice. Mostly due to political reasons
The nation is in a run away housing boom, one of which people have been warning will explode since around 2000/2001. The fact it's continued this far has made it more and more alarming
The extremely conservative government in charge since 2013 (ironically called "The Liberal Party") has pushed in blatantly corrupt and utterly abhorrent directions in virtually every political policy since day one
The nation is warning of a "brain drain" taking place as the young and skilled jet off to the US, Europe and others. Australia has become a digital backwater due to the "National Broadband Network" (NBN) becoming a political football and being firmly run into the ground
With a ballooning near half trillion dollar government debt (at the time of writing) and a housing market on the verge of either total collapse under its own weight, or simply running out of runway to continue expanding, an aging populace with its educated young leaving and a government paralyzed by its own incompetence, Australia is heading for some seriously tough times
The nation is in a run away housing boom, one of which people have been warning will explode since around 2000/2001. The fact it's continued this far has made it more and more alarming
The extremely conservative government in charge since 2013 (ironically called "The Liberal Party") has pushed in blatantly corrupt and utterly abhorrent directions in virtually every political policy since day one
The nation is warning of a "brain drain" taking place as the young and skilled jet off to the US, Europe and others. Australia has become a digital backwater due to the "National Broadband Network" (NBN) becoming a political football and being firmly run into the ground
With a ballooning near half trillion dollar government debt (at the time of writing) and a housing market on the verge of either total collapse under its own weight, or simply running out of runway to continue expanding, an aging populace with its educated young leaving and a government paralyzed by its own incompetence, Australia is heading for some seriously tough times
I'm a brain-drainer - born and bred in Perth, but well and truly never lived in Australia. As soon as I could, I left .. and every time I return, it is as a tourist.
That said, I hope there are some houses left to buy, at the end of a long dusty road, next to a beach or two, some day in the future. Would be fun to return when the madness is over (i.e. Australia gets real Internet, &etc.)
That said, I hope there are some houses left to buy, at the end of a long dusty road, next to a beach or two, some day in the future. Would be fun to return when the madness is over (i.e. Australia gets real Internet, &etc.)
You were born and bred in Perth, but never truly lived in Australia, that makes no sense.
I was born and lived an Aussie life, but in my young adult life moved out of Australia and have lived all over the world. I don't associate with Australian culture much, but I sure miss the beaches. So when I go back, its mostly tourism...
OP probably means had a job and lived as an adult etc.
As an Australian who has paid close attention to these matters for many years, I share your concern but think the assessment is overblown.
The housing boom is driven by a combination of: (a) Australia's cultural devotion to home ownership as a conventional life milestone; (b) foreign investment and immigration, and (c) high incomes due to the mining boom and prolonged overall economic strength. Of those factors, (a) and (b) are not going to end any time soon. A global recession/economic crisis would obviously affect (c), but Australia has weathered several of these in past decades. If/when it happens, it should cause a slowing and/or a correction, but not a total crash, unless the world economy crashes. On the other hand, continued global growth, particularly in China and India, will keep fuelling demand for Australia's resources, products, services and land. Why is the worst-case scenario more likely than the best?
The political situation might seem grim, but it's not nearly as bad as the US or the UK or parts of continental Europe.
The "brain drain" issue has been a concern for many years, but if anything I'm starting to see that reversing; people I know who had left for Silicon Valley or New York or London for better career opportunities are now looking to move back, because Australia seems so idyllic compared to the chaos that's reigning elsewhere. I've noticed a vast improvement in the scale and quality of entrepreneurial activity in Australia in the past few years, and I keep hearing from expats that they're noticing how much better things are getting back home, and how much they'd like to come back and be a part of it.
The NBN is an issue that people love to use to hurl abuse at the government whilst simultaneously complaining about ballooning national debt. You can't have it both ways. It was a costly and risky project from the moment it was conceived by the previous government, and since then it's just been a case of getting it done while keeping cost blowouts and delays to a minimum. As a technology professional who cares about fast broadband as much as anyone, I can tell you that the NBN services I've had at my previous home (FTTB) and my new home (FTTP) are as reliable and fast as I could hope for, and I find cellular and terrestrial internet in Australia to be at least as good, and usually better than what I've experienced on recent trips to the US.
I don't deny there's cause for concern; I've been as mindful of, and worried about the risks as anyone. But painting it as all negative, and pinning all the blame for all the problems on the current government is inaccurate, unfair and excessively pessimistic.
So yes, there are challenges; there are great challenges everywhere in the world, as there always are. But there are also great opportunities and reasons for optimism.
It pays to take a balanced view.
The housing boom is driven by a combination of: (a) Australia's cultural devotion to home ownership as a conventional life milestone; (b) foreign investment and immigration, and (c) high incomes due to the mining boom and prolonged overall economic strength. Of those factors, (a) and (b) are not going to end any time soon. A global recession/economic crisis would obviously affect (c), but Australia has weathered several of these in past decades. If/when it happens, it should cause a slowing and/or a correction, but not a total crash, unless the world economy crashes. On the other hand, continued global growth, particularly in China and India, will keep fuelling demand for Australia's resources, products, services and land. Why is the worst-case scenario more likely than the best?
The political situation might seem grim, but it's not nearly as bad as the US or the UK or parts of continental Europe.
The "brain drain" issue has been a concern for many years, but if anything I'm starting to see that reversing; people I know who had left for Silicon Valley or New York or London for better career opportunities are now looking to move back, because Australia seems so idyllic compared to the chaos that's reigning elsewhere. I've noticed a vast improvement in the scale and quality of entrepreneurial activity in Australia in the past few years, and I keep hearing from expats that they're noticing how much better things are getting back home, and how much they'd like to come back and be a part of it.
The NBN is an issue that people love to use to hurl abuse at the government whilst simultaneously complaining about ballooning national debt. You can't have it both ways. It was a costly and risky project from the moment it was conceived by the previous government, and since then it's just been a case of getting it done while keeping cost blowouts and delays to a minimum. As a technology professional who cares about fast broadband as much as anyone, I can tell you that the NBN services I've had at my previous home (FTTB) and my new home (FTTP) are as reliable and fast as I could hope for, and I find cellular and terrestrial internet in Australia to be at least as good, and usually better than what I've experienced on recent trips to the US.
I don't deny there's cause for concern; I've been as mindful of, and worried about the risks as anyone. But painting it as all negative, and pinning all the blame for all the problems on the current government is inaccurate, unfair and excessively pessimistic.
So yes, there are challenges; there are great challenges everywhere in the world, as there always are. But there are also great opportunities and reasons for optimism.
It pays to take a balanced view.
Article is pretty comprehensive. Just add that the government in power during a housing price collapse will be out, so they'll do whatever they can to forestall it.
High immigration rates mentioned in the article are because Australia is a great place to live; this will comtinue.
We did have a housing correction a decade or two ago, with a mostly soft-landing. But instead of prices actually falling, people avoided selling of they could.
The only way prices will fall in practice is if the economy implodes - while this could happen, like a nuclear war, there would be much more serious problems to consider than house prices if it did.
High immigration rates mentioned in the article are because Australia is a great place to live; this will comtinue.
We did have a housing correction a decade or two ago, with a mostly soft-landing. But instead of prices actually falling, people avoided selling of they could.
The only way prices will fall in practice is if the economy implodes - while this could happen, like a nuclear war, there would be much more serious problems to consider than house prices if it did.
Presumably interest rates will just be slashed to near zero in order to alleviate the pain and boost inflation in order to erode the debt. Basically what happened in the UK/US post 2008 crash.
The Open Data Institute did a talk on the correlation between empty properties and high house prices yesterday:
https://www.youtube.com/watch?v=hbua6Ccyguo
https://www.youtube.com/watch?v=hbua6Ccyguo
TL;DW version?
It's a modern take of Georgism to say land speculation is whats causing housing prices to soar.
It's a modern take of Georgism to say land speculation is whats causing housing prices to soar.
The only thing more important to the Australian economy than China is housing.
Many seem to think that the Australian property market will crash like the US market did during the financial crisis.
It'll be interesting to see. I'm sure the apartment markets in Sydney, Melbourne and Brisbane will see some falling prices at some point, but few professionals are forecasting a US-style crash. Instead, most think prices will just stop growing.
I see lots of people saying "the bubble will burst", but it seems to me many of them are hoping to get into the market rather than looking at any evidence.
Many seem to think that the Australian property market will crash like the US market did during the financial crisis.
It'll be interesting to see. I'm sure the apartment markets in Sydney, Melbourne and Brisbane will see some falling prices at some point, but few professionals are forecasting a US-style crash. Instead, most think prices will just stop growing.
I see lots of people saying "the bubble will burst", but it seems to me many of them are hoping to get into the market rather than looking at any evidence.
The evidence presented is usually the (very high) levels of consumer debt, the (very high) exposure of Australian banks to property, the lack of economic diversification, and the effects of foreign speculation.
I'm not working in finance, but whether false or true, this seems like an attempt at some kind of evidence of the potential for cascading failure.
I'm not working in finance, but whether false or true, this seems like an attempt at some kind of evidence of the potential for cascading failure.
Yeah, civilians take that to imply a crash in prices. It's not.
[deleted]
So I'm from Perth. Well, technically I largely grew up in mining towns but basically I'm from Perth. I've now lived in NYC for 7 years. I've also lived in the London, Zurich and Germany (Cologne).
Perth had a lot going for it 20 years ago. The standard of living was incredibly affordable. The weather was nice. It was a dull place but well-suited to outdoor activities and raising a family.
In the early 2000s the resources boom happened, fueled by China's insatiable appetite. In the space of 5 years, a 1970s brick home <5km from the CBD went from <A$100k to A$400k. One of my biggest regrets was walking away from buying a house in 2002 that overlooked the ocean for A$430k that 4 years later would've been worth probably A$1.5-1.8m.
Now at the time the same headlines reigned. Prices are going to crash. But in hindsight there were four important factors:
1. Housing was previously too cheap and there was a correction;
2. The resources boom created a massive backlog of construction projects that choked supply for building in the housing market meaning building a house took longer and was more expensive. In the 90s you'd have TV ads for house and land packages for A$100k that would take 3-6 months to build. In a short space of time building a house took 12-18 months and cost $300k+ plus land.
3. The resource boom brought an influx of skilled migrants that increased demand.
4. Those in mining and construction got paid a whole lot more which means they could spend a whole lot more and there's only so much inventory of desirable property (near the city or on the coast or river). Trading up to those properties created a windfall from current owners which they then spent and so on.
So the GFC came in 2007. Australia didn't have the subprime problem that the US did. More importantly though, in 2008 China stopped buying as many resources. Again the predictions of doom came. Momentum probably drove the market still up (in parts anyway) for another 2-3 years. Since then it's either gone down (<10% mostly) or stagnated. In the last few years this has caught up with rents and properties that once might have 50 applicants for $500/week now couldn't be filled at $350/week.
This seems to be the Australian norm for property cycles. It happened in Sydney in the 1970s. Sydney became really expensive but probably stagnated until the mid 1990s at least.
While this was all going on in Perth and Brisbane (Western Australia and Queensland are the two big resource states), Sydney and Melbourne were going nowhere.
What changed around 2010-2011 is the same thing that happened in many other places around the world: money came into real estate in the large cities. Particularly foreign money. Particularly Chinese money.
Some will argue low interest rates were driving this but they're wrong. Properties above $3-5m in NYC for example aren't bought by people with a mortgage. They're bought with cash.
It seems like certain people in China built up a large amount of wealth in the 2000s and the government placed restrictions on how that capital could leave. I believe that certain investments including real estate were one such exception. Wealthy Chinese wanted to get money beyond Beijing's control. They also wanted to have an "out" by buying residency/citizenship in other countries.
So in the last 7 years median prices in Sydney went from (IIRC) ~A$680k to A$1.1m. Bear in mind that this is even with large swathes of suburban wastelands in Sydney's West ostensibly bringing the median down. The effect on the harbour, the ocean and in Sydney's inner suburbs and North Shore is even more pronounced.
All the while software engineers might still be getting paid the same A$150k + bonus they could get 10-15 years ago.
High property prices really are a disease. It makes rent more expensive. It makes everything you buy more expensive since something has to cover the cost of the premises those goods and services come from.
I believe Switzerland has a far better policy approach to this than many other countries I've seen. The intent seems to be that it is an undesirable outcome to have foreign money come in and buy up the country, basically. Likewise, they don't want a rampant speculative market so short term capital gains on property are taxed punitively. It may have changed but when I was there this meant 100% of gains if sold within 2 years and this eventually scaled down over the next 8 years.
People need somewhere to live. Even if they don't buy, prices drive rent. Only luxury buildings get built in NYC now because it doesn't cost much more than "affordable" buildings but it's a whole lot more profitable. That needs to change. The world's cities can't just be used for money laundering and a holding asset for the ultra-wealthy across the world.
So as for Sydney and Melbourne I don't think the prices are going to come crashing down. They may stagnate for years and even dip. But the Australian banking industry is pretty well-regulated (by comparison to the US anyway) and for those at the high end of the market, they've paid cash anyway so who cares what they do or lose? What I mean is dropping prices won't force them to sell.
Perth had a lot going for it 20 years ago. The standard of living was incredibly affordable. The weather was nice. It was a dull place but well-suited to outdoor activities and raising a family.
In the early 2000s the resources boom happened, fueled by China's insatiable appetite. In the space of 5 years, a 1970s brick home <5km from the CBD went from <A$100k to A$400k. One of my biggest regrets was walking away from buying a house in 2002 that overlooked the ocean for A$430k that 4 years later would've been worth probably A$1.5-1.8m.
Now at the time the same headlines reigned. Prices are going to crash. But in hindsight there were four important factors:
1. Housing was previously too cheap and there was a correction;
2. The resources boom created a massive backlog of construction projects that choked supply for building in the housing market meaning building a house took longer and was more expensive. In the 90s you'd have TV ads for house and land packages for A$100k that would take 3-6 months to build. In a short space of time building a house took 12-18 months and cost $300k+ plus land.
3. The resource boom brought an influx of skilled migrants that increased demand.
4. Those in mining and construction got paid a whole lot more which means they could spend a whole lot more and there's only so much inventory of desirable property (near the city or on the coast or river). Trading up to those properties created a windfall from current owners which they then spent and so on.
So the GFC came in 2007. Australia didn't have the subprime problem that the US did. More importantly though, in 2008 China stopped buying as many resources. Again the predictions of doom came. Momentum probably drove the market still up (in parts anyway) for another 2-3 years. Since then it's either gone down (<10% mostly) or stagnated. In the last few years this has caught up with rents and properties that once might have 50 applicants for $500/week now couldn't be filled at $350/week.
This seems to be the Australian norm for property cycles. It happened in Sydney in the 1970s. Sydney became really expensive but probably stagnated until the mid 1990s at least.
While this was all going on in Perth and Brisbane (Western Australia and Queensland are the two big resource states), Sydney and Melbourne were going nowhere.
What changed around 2010-2011 is the same thing that happened in many other places around the world: money came into real estate in the large cities. Particularly foreign money. Particularly Chinese money.
Some will argue low interest rates were driving this but they're wrong. Properties above $3-5m in NYC for example aren't bought by people with a mortgage. They're bought with cash.
It seems like certain people in China built up a large amount of wealth in the 2000s and the government placed restrictions on how that capital could leave. I believe that certain investments including real estate were one such exception. Wealthy Chinese wanted to get money beyond Beijing's control. They also wanted to have an "out" by buying residency/citizenship in other countries.
So in the last 7 years median prices in Sydney went from (IIRC) ~A$680k to A$1.1m. Bear in mind that this is even with large swathes of suburban wastelands in Sydney's West ostensibly bringing the median down. The effect on the harbour, the ocean and in Sydney's inner suburbs and North Shore is even more pronounced.
All the while software engineers might still be getting paid the same A$150k + bonus they could get 10-15 years ago.
High property prices really are a disease. It makes rent more expensive. It makes everything you buy more expensive since something has to cover the cost of the premises those goods and services come from.
I believe Switzerland has a far better policy approach to this than many other countries I've seen. The intent seems to be that it is an undesirable outcome to have foreign money come in and buy up the country, basically. Likewise, they don't want a rampant speculative market so short term capital gains on property are taxed punitively. It may have changed but when I was there this meant 100% of gains if sold within 2 years and this eventually scaled down over the next 8 years.
People need somewhere to live. Even if they don't buy, prices drive rent. Only luxury buildings get built in NYC now because it doesn't cost much more than "affordable" buildings but it's a whole lot more profitable. That needs to change. The world's cities can't just be used for money laundering and a holding asset for the ultra-wealthy across the world.
So as for Sydney and Melbourne I don't think the prices are going to come crashing down. They may stagnate for years and even dip. But the Australian banking industry is pretty well-regulated (by comparison to the US anyway) and for those at the high end of the market, they've paid cash anyway so who cares what they do or lose? What I mean is dropping prices won't force them to sell.
Is measuring total housing assets vs GDP [first graph] useful? On the one hand housing is related to the size of the population, and population is related to GDP, so it seems like the two measures should roughly follow each other. On the other hand price and availability of land must be a big factor (hence the US ratio being very low). Also it's unclear that total housing assets is a real thing since the vast majority of houses are not bought or sold regularly so the price can be unduly affected by a frothy minority of sales.
House prices won't go down in Australia. There's an infinite supply of corrupt Chinese cash that needs to be laundered, and every Australian is entitled to sell their piece of Australia to get their fair share.
Ha ha downvotes from those with a vested interest in getting those sweet sweet Chinese dollars.
Ha ha downvotes from those with a vested interest in getting those sweet sweet Chinese dollars.
> Ha ha downvotes from those with a
This breaks the site guidelines. Could you please read them and not do that again?
https://news.ycombinator.com/newsguidelines.html
This breaks the site guidelines. Could you please read them and not do that again?
https://news.ycombinator.com/newsguidelines.html
I think you mean "the Chinese authorities cannot possibly get a list of Australian property owners and jail a few thousand of the ones that can't explain the origin of their money".
No, I mean that there is on onus in Australian law to prove other forms of investment are not from criminal origin, but no such onus on real estate.
That's because no one wants to look at the fact that our housing boom is driven by the proceeds of crime on a gargantuan scale.
That's because no one wants to look at the fact that our housing boom is driven by the proceeds of crime on a gargantuan scale.
Oh, I see. You're talking about a giant immigration wave from China. I thought you had in mind people who were subject to Chinese law and could be arrested by Chinese police.
No, that would be racist.
I object only to real estate sales to people who are not permanent residents or citizens. I don't give a shit what country any Australian is originally from ... we are all Australians who hold citizen or permanent residen status, no matter the color of your skin or religion.
I object only to real estate sales to people who are not permanent residents or citizens. I don't give a shit what country any Australian is originally from ... we are all Australians who hold citizen or permanent residen status, no matter the color of your skin or religion.
I think this is a global phenomenon.Real Estate prices in India escalated pretty much because people settled in decided to put their money into buying houses so that they can sell or rent them for a very high returns. This in turn forced realtors to over extend themselves.
Our previous government was corrupt to the hilt so this continued for over a decade. That said India now have strict regulations in place[1] to curb this behaviour. I am not sure why other countries cannot follow suit.
I have no issues with foreign investment comes into infrastructure and commercial space. I think its mutually beneficial. However, inflow of foreign money into housing is just evil. Local population with fixed means of income just cannot.
[1] http://www.freepressjournal.in/india/rera-all-you-need-to-kn...
Our previous government was corrupt to the hilt so this continued for over a decade. That said India now have strict regulations in place[1] to curb this behaviour. I am not sure why other countries cannot follow suit.
I have no issues with foreign investment comes into infrastructure and commercial space. I think its mutually beneficial. However, inflow of foreign money into housing is just evil. Local population with fixed means of income just cannot.
[1] http://www.freepressjournal.in/india/rera-all-you-need-to-kn...
But if they aren't permanent residents, then they are subject to the law of whatever country where they spend the rest of their time. China, I presume. So when you say there's an infinite supply, you imply that the Chinese police cannot obtain Australian property records and use those to identify and imprison a few thousand corrupt officials.
The most corrupt people are the older upper middle class Australians. They are happy to do nothing at all other than "own property" and rake in ridiculous amounts of money. All they are doing is sucking the money from younger or poorer people and transferring it to themselves without actually doing any work or adding any productivity to society.
I live in an area with lots of these investors and they don't work. They talk about it in hushed tones like it is a scheme or a rort, which is obviously is.
I live in an area with lots of these investors and they don't work. They talk about it in hushed tones like it is a scheme or a rort, which is obviously is.
not sure corrupt is the right word, but I get your point
I suspect you are being downvoted because of your simplistic worldview.
Those who hope for high house prices downvote - they know their paper wealth depends on the Chinese keeping house prices propped high.
Those who feel Australian society ruined by the housing obsession vote back up.
Nice and simple.
Those who feel Australian society ruined by the housing obsession vote back up.
Nice and simple.
I can't downvote, but I hope for high house prices. What do I do?
You look into you heart and know that we're selling everything valuable in Australia to China. Our houses, our farmland, our infrastructure, our natural resources. Everything must go.
That's not living, it's not a society, it's not a future for our children, it's just self interest and greed.
If you have integrity then you stand for what's right, if, like half Australia, you depend on this corrupt system, then you keep nice and quiet.
That's not living, it's not a society, it's not a future for our children, it's just self interest and greed.
If you have integrity then you stand for what's right, if, like half Australia, you depend on this corrupt system, then you keep nice and quiet.
I would agree with the "simplistic view" comment, except for the fact that I live here and have seen it happening for at least the last decade. Foreign investors are literally buying up streets of houses, without regard to the price; Chinese companies are buying up as much farmland as they can; Adani is trying to mine as much coal with no regard to the environment while getting billions in Government assistance; and don't get me started on all the Chinese buying up as much baby formula as they can and sending it back home to their relatives.
There's a difference between immigrating to a country because you want to live there, and immigrating to pump it for its resources until it runs dry.
There's a difference between immigrating to a country because you want to live there, and immigrating to pump it for its resources until it runs dry.
Those who think that Chinese investors are only one part of an incredibly complex issue don't vote you up or down.
Rent component of CPI: is it all rents (lagging indicator) or just newly singed leases (current indicator)?
all you need to do is buy bitcoin and wait 3 months and you will have enough money to buy a house. Simple.
If you had invested 100k in bitcoin in 2011, you would have 300 million today ~
Exactly, and it's not too late
Why are banks allowed to create cheap credit out of nothing and when the bubble eventually bursts the banks are always saved by the tax payers?
What i an trying to say is private investors in the banks and its debt profits during the good boom time on the loans but the tax payers pays for the losses after bubbles burst. This is not pure capitalism it’s something else.
Big thanks goes out to all coders working on block chain technologies! You will change the world to a better place!
What i an trying to say is private investors in the banks and its debt profits during the good boom time on the loans but the tax payers pays for the losses after bubbles burst. This is not pure capitalism it’s something else.
Big thanks goes out to all coders working on block chain technologies! You will change the world to a better place!
We've had unprecedented global quantitative easing over the past decade, so it's quite natural that house prices globally will meet and surpass all time highs.
This is what happens when you keep printing money and set precedents such as bank bail outs and debt write offs. If all money woes can be solved simply by printing money it begs the question why don't we just keep printing more? And the realisation soon hits home that if you were to do that, the price of everything would rise, the rich would get richer and they could simply hoard all land and property indefinitely while sucking every last cent out of people starting out in life...
It works up until the bit where people start getting angry and create a toxic environment in which nobody wants to live or do business...