4 ms·

It’s largely understood (I am in a pub halfway across the world and have no specific citation) that the FHBG just bumped the purchase price up by that amount. I

by NamTaf 4y ago

It’s largely understood (I am in a pub halfway across the world and have no specific citation) that the FHBG just bumped the purchase price up by that amount. In Australia, many new buyers’ max purchase prices are dictated by their total borrowing capacity (in that, few limit themselves to less), and many FHBs are competing against each other for a similar cross-section of the market, so grants are easily absorbed by total prices because now FHB B can bid [x] higher and will. I agree that negative gearing is far more impactful, but I certainly don’t believe my FHB grant helped me enter the market. It just meant I paid that much more to a seller for the same thing.

DangitBobby 4y ago
Not everyone is a first time homebuyer though. Why would the market bear that price bump?
- OJFord 4y ago
  Not every house in the market is going to be a first home either though; especially when such incentives are often limited to a certain (the lower end) range.
car_analogy 4y ago
> In Australia, many new buyers’ max purchase prices are dictated by their total borrowing capacity That's the wonderful part about lending - it's an arms race, where the lender always wins.
- gbasin 4y ago
  Until there's mass defaults
  - gruez 4y ago
    That's when you have the government bail them out :)
    - BizarroLand 4y ago
      And then the people who profited in the interim buy up all of the cheap surplus, sit on it for a few years and then trickle it back out as the prices return to normal, making massive returns on their investment, profiting off of the misery they created in the first place. And you can't even be mad at them for it because there's no collusion, no intent to manufacture the disaster, no single person responsible for it all, this is just the consequence of economic torture by a hundred thousand cuts. Their hands are clean even though the damage is still done.
      - imtringued 4y ago
        Well, if only there was a way to let the market say that there is too much financial capital and tell lenders to go away. It's actually quite stupid. As you said, no single person is responsible. You have this gold standard thing. The reason why it doesn't work is that gold or money is the financial equivalent of real estate. You don't need money in itself for anything. You need money to trade your labor in for products and services, as a medium of exchange. It's analogous to a bazar except you must go to this specific bazar and there is a limited number of stalls. You only need a stall for 5 minutes to do your transaction, you don't need the stall itself. We have collectively decided that people have the right to own these stalls. Here is the problem. If you are young and you have to work, you need to go to a stall and do transactions that let you sell your time. However, all the stalls are already taken by older people. They won't let go of their stalls, they want to take them into the grave, because they are scared of not having a stall when they really need it. So instead, they rent out the stall and let you use it for a short amount of time. Now let's say the interest rate demanded is way too high and you refuse to borrow and fall for the debt trap. What are you going to do? Stay unemployed? Ok, but now you have lots of time to think and organize and a clear group of people that you dislike. This is the perfect growth medium for extremism. So, we did away with a fixed number of stalls. Instead, we have decided to give everyone a stall. The problem is that those old people are now buying a second, third, hundredth stall. The amount of free stalls remains laughably small, forcing the government to keep increasing the number of stalls exponentially. When you think about it, those stalls are public property and people who have no business blocking them are wasting everyone else's time. It's like someone is parking in the middle of the road and blocking traffic. Normally you would call the police and they will confirm the traffic violation and then tow the car away and fine the owner. We don't do this with the stalls. There is no incentive for anyone to get on with their business as quickly as possible, so people grab as many stalls as possible. There is no opportunity cost to them but there is a huge opportunity cost to those who need stalls but can't get them. This is where the exploitation of the have nots by the haves originates. There are enough stalls for everyone but nobody is giving up the extra stalls that they don't need immediately. The wrong/incorrect allocation of stalls toward those who don't need them and away from those who need them is at the root of the problem. In theory, a market would automatically solve this problem. Why doesn't it? My argument is that we need to introduce a fee on the stalls to punish slowpokes and make sure people keep those stalls free if they don't need them. This means that if people are refusing to rent a stall, the owner of the stall would be left with an asset that is losing them value instead of a tool that can be abused for power. In short, the problem is that the interest rate must become negative to discourage people from indebting other people against their will when an economy that is no longer growing (for short bursts or maybe even forever) has no need for further debt, debt that can only be paid through inflation.
collegeburner 4y ago
Yeah this is the same problem we have with college in America: prices keep rising because the government keeps lending more.
- ZoomerCretin 4y ago
  This is actually a disproven myth. College prices rise because historically high state funding per student has been cut or not kept pace with increasing enrollment. The federal government has capped the amount it loans to $52k for an undergraduate degree for a long time now. Reducing access to federal loans doesn't have anything to do with the cost of providing a college education.
derefr 4y ago
I've always wondered whether higher-level "global top-down" market distortions (i.e. ones that use economic statistics as an input) would work here, where these sorts of naive "local bottom-up" manipulations fail. For example, requiring that home sellers sell their homes with total consideration (incl. any required "side payments" to third parties) matching the mean market value of equivalent homes in other non-manipulated markets. Or requiring that homeowners get their home appraised, and then legally mandate that consumers be charged a total compensation of at most the appraised value minus 10% to buy said home; with it being left up to the homeowner how to make that happen. (Where they can apply for their own government grants or whatever else, but they can't do anything that increases the total compensation demanded from the buyer—which would include taking any grants given to the buyer for buying a home.)

by NamTaf 4y ago

DangitBobby 4y ago

Not everyone is a first time homebuyer though. Why would the market bear that price bump?

OJFord 4y ago
Not every house in the market is going to be a first home either though; especially when such incentives are often limited to a certain (the lower end) range.

car_analogy 4y ago

> In Australia, many new buyers’ max purchase prices are dictated by their total borrowing capacity That's the wonderful part about lending - it's an arms race, where the lender always wins.

gbasin 4y ago
Until there's mass defaults
- gruez 4y ago
  That's when you have the government bail them out :)
  - BizarroLand 4y ago
    And then the people who profited in the interim buy up all of the cheap surplus, sit on it for a few years and then trickle it back out as the prices return to normal, making massive returns on their investment, profiting off of the misery they created in the first place. And you can't even be mad at them for it because there's no collusion, no intent to manufacture the disaster, no single person responsible for it all, this is just the consequence of economic torture by a hundred thousand cuts. Their hands are clean even though the damage is still done.
    - imtringued 4y ago
      Well, if only there was a way to let the market say that there is too much financial capital and tell lenders to go away. It's actually quite stupid. As you said, no single person is responsible. You have this gold standard thing. The reason why it doesn't work is that gold or money is the financial equivalent of real estate. You don't need money in itself for anything. You need money to trade your labor in for products and services, as a medium of exchange. It's analogous to a bazar except you must go to this specific bazar and there is a limited number of stalls. You only need a stall for 5 minutes to do your transaction, you don't need the stall itself. We have collectively decided that people have the right to own these stalls. Here is the problem. If you are young and you have to work, you need to go to a stall and do transactions that let you sell your time. However, all the stalls are already taken by older people. They won't let go of their stalls, they want to take them into the grave, because they are scared of not having a stall when they really need it. So instead, they rent out the stall and let you use it for a short amount of time. Now let's say the interest rate demanded is way too high and you refuse to borrow and fall for the debt trap. What are you going to do? Stay unemployed? Ok, but now you have lots of time to think and organize and a clear group of people that you dislike. This is the perfect growth medium for extremism. So, we did away with a fixed number of stalls. Instead, we have decided to give everyone a stall. The problem is that those old people are now buying a second, third, hundredth stall. The amount of free stalls remains laughably small, forcing the government to keep increasing the number of stalls exponentially. When you think about it, those stalls are public property and people who have no business blocking them are wasting everyone else's time. It's like someone is parking in the middle of the road and blocking traffic. Normally you would call the police and they will confirm the traffic violation and then tow the car away and fine the owner. We don't do this with the stalls. There is no incentive for anyone to get on with their business as quickly as possible, so people grab as many stalls as possible. There is no opportunity cost to them but there is a huge opportunity cost to those who need stalls but can't get them. This is where the exploitation of the have nots by the haves originates. There are enough stalls for everyone but nobody is giving up the extra stalls that they don't need immediately. The wrong/incorrect allocation of stalls toward those who don't need them and away from those who need them is at the root of the problem. In theory, a market would automatically solve this problem. Why doesn't it? My argument is that we need to introduce a fee on the stalls to punish slowpokes and make sure people keep those stalls free if they don't need them. This means that if people are refusing to rent a stall, the owner of the stall would be left with an asset that is losing them value instead of a tool that can be abused for power. In short, the problem is that the interest rate must become negative to discourage people from indebting other people against their will when an economy that is no longer growing (for short bursts or maybe even forever) has no need for further debt, debt that can only be paid through inflation.

collegeburner 4y ago

Yeah this is the same problem we have with college in America: prices keep rising because the government keeps lending more.

ZoomerCretin 4y ago
This is actually a disproven myth. College prices rise because historically high state funding per student has been cut or not kept pace with increasing enrollment. The federal government has capped the amount it loans to $52k for an undergraduate degree for a long time now. Reducing access to federal loans doesn't have anything to do with the cost of providing a college education.

derefr 4y ago

I've always wondered whether higher-level "global top-down" market distortions (i.e. ones that use economic statistics as an input) would work here, where these sorts of naive "local bottom-up" manipulations fail. For example, requiring that home sellers sell their homes with total consideration (incl. any required "side payments" to third parties) matching the mean market value of equivalent homes in other non-manipulated markets. Or requiring that homeowners get their home appraised, and then legally mandate that consumers be charged a total compensation of at most the appraised value minus 10% to buy said home; with it being left up to the homeowner how to make that happen. (Where they can apply for their own government grants or whatever else, but they can't do anything that increases the total compensation demanded from the buyer—which would include taking any grants given to the buyer for buying a home.)