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Well I'm torn. Property has irrefutable value from location, size, features, condition and a certain je-ne-sais-quoi… by extension a limited supply and increas

Well I'm torn. Property has irrefutable value from location, size, features, condition and a certain je-ne-sais-quoi… by extension a limited supply and increasing demand of this commoditised necessity would naturally push prices up… … but if you look at the past 30 years, something has broken. Population sizes haven't exploded in the same way that housing has. Jobs haven't centralised. All to say: demand is not that much higher. You can only levy a small amount of this on more complex materials and inflation. Some on demand. Do we blame the rest on lenders? If we couldn't afford to borrow, we wouldn't buy the houses we have and therefore wouldn't be competing for more expensive houses, so they wouldn't be as expensive. Lenders have changed how much they lend you in relation to your income. It was x3 when we bought our first house, then x4 when we bought our second and x6 most recently. I thought this was a reaction to house prices, but have I had this the wrong way round? Do we need to strangle the market and get mortgages back to the "gross x2" that was common in the 90s? What happens to the people that own property now? Why should we pay for the banks' greed again?

rstuart4133 3y ago
> Population sizes haven't exploded in the same way that housing has. I presume you mean population sizes haven't exploded like house prices have. True, but I would not expect that. What we see is the marginal cost of house prices increasing. Maybe that's the wrong term, but I mean the people being hurt are people entering the housing market. If you owned a house 20 years ago, you are sitting on top of a rising tide. All it takes to make a house cost 7.5 times the average wage is a couple of decades of demand outstripping supply. And on that topic here are some copy & pastes from: https://www.macrobusiness.com.au/2023/07/australias-housing- https://www.macrobusiness.com.au/2023/07/australias-housing-... Australia has had one of the highest rates of housing construction in the developed world We also have one of the highest numbers of construction workers per capita in the OECD Australia also ramped-up housing construction to record levels last decade However, this surge in construction was swamped by the unprecedented jump in net overseas migration from 2005, which is projected to run even higher over the next five years Perhaps you prefer pictures. This is a graph of historical population growth rates: https://api.macrobusiness.com.au/wp-content/uploads/2023/11/Historical-NOM.png https://api.macrobusiness.com.au/wp-content/uploads/2023/11/... Notice how the uplift in the graph reflects the uplift in in house prices. It started with John Howard era, and I suspect it was a deliberate "Big Australia" policy from his government. As an aside I will forever remain impressed by Howard pumping Australia full of immigrants, while at the same time winning elections based on his efforts at stopping immigration ("the boats"). The big Australia policy was then enthusiastically continued by federal governments of both colours in the 2 decades since. It's taken 20 years to bite as hard as it has. It looks like the media is finally waking up to what is really driving house prices, hospital ramping, clogged roads and a myriad of other problems. I base that on seeing the commercial TV news shows ascribing those problems to population growth rather than state government / airbnb / speculators ... (pick any plausible sounding thought bubble to spout as "news") in the 2nd half of this year. This in turn is driving the blame for those outcomes to the federal government (where it belongs, because they control immigration intakes). The current mob seems to waking up to the fact that "big Australia" might be turning into electoral poison. But it took 20 years of big immigration to create the current situation, even if they fixed it tomorrow I doubt sane house prices will return for at least another decade.
- oliwarner 3y ago
  I think my broader point that I was nudging towards —and that fits Australia perfectly— is that these houses can only carry on getting more expensive while people can still buy them. We can still buy them because we're not limited to the mortgages our parents were. No bank manager in their right mind would have entertained a loan 6x gross annual salary in the 90s. I see that Australia has a monthly repayment stress test threshold of 30%, but I can't see anything about limiting the principal. My theory is that banks started offering higher principal loans, with less security to unshackle prices. If more people can suddenly "afford" a $1m house, demand pushes the price up to $1.2m. Bigger loans. Bigger profits. If you're only looking at repayments in a time of low interest, that's going to cause a lot of irresponsible lending, and a lot of price inflation. And in Australia this is particularly true because they're not just filling up with immigrants, they're deliberately poaching skilled workers who immediately hit the mid-to-higher-end house market, without the multi-generational lag of typically poorer, asylum-seeking immigrants. It's made everyone with property rich. It's made everyone with developable land insanely rich. And the economy there bubbles on with that cyclic investment. But what happens when you reach the cap and the lower working class can no longer afford to live there? Immigration has only been so high because people can afford to move there. This keeps coming back to the money. All these problems are caused by finance.

rstuart4133 3y ago

> Population sizes haven't exploded in the same way that housing has. I presume you mean population sizes haven't exploded like house prices have. True, but I would not expect that. What we see is the marginal cost of house prices increasing. Maybe that's the wrong term, but I mean the people being hurt are people entering the housing market. If you owned a house 20 years ago, you are sitting on top of a rising tide. All it takes to make a house cost 7.5 times the average wage is a couple of decades of demand outstripping supply. And on that topic here are some copy & pastes from: https://www.macrobusiness.com.au/2023/07/australias-housing- https://www.macrobusiness.com.au/2023/07/australias-housing-... Australia has had one of the highest rates of housing construction in the developed world We also have one of the highest numbers of construction workers per capita in the OECD Australia also ramped-up housing construction to record levels last decade However, this surge in construction was swamped by the unprecedented jump in net overseas migration from 2005, which is projected to run even higher over the next five years Perhaps you prefer pictures. This is a graph of historical population growth rates: https://api.macrobusiness.com.au/wp-content/uploads/2023/11/Historical-NOM.png https://api.macrobusiness.com.au/wp-content/uploads/2023/11/... Notice how the uplift in the graph reflects the uplift in in house prices. It started with John Howard era, and I suspect it was a deliberate "Big Australia" policy from his government. As an aside I will forever remain impressed by Howard pumping Australia full of immigrants, while at the same time winning elections based on his efforts at stopping immigration ("the boats"). The big Australia policy was then enthusiastically continued by federal governments of both colours in the 2 decades since. It's taken 20 years to bite as hard as it has. It looks like the media is finally waking up to what is really driving house prices, hospital ramping, clogged roads and a myriad of other problems. I base that on seeing the commercial TV news shows ascribing those problems to population growth rather than state government / airbnb / speculators ... (pick any plausible sounding thought bubble to spout as "news") in the 2nd half of this year. This in turn is driving the blame for those outcomes to the federal government (where it belongs, because they control immigration intakes). The current mob seems to waking up to the fact that "big Australia" might be turning into electoral poison. But it took 20 years of big immigration to create the current situation, even if they fixed it tomorrow I doubt sane house prices will return for at least another decade.

oliwarner 3y ago
I think my broader point that I was nudging towards —and that fits Australia perfectly— is that these houses can only carry on getting more expensive while people can still buy them. We can still buy them because we're not limited to the mortgages our parents were. No bank manager in their right mind would have entertained a loan 6x gross annual salary in the 90s. I see that Australia has a monthly repayment stress test threshold of 30%, but I can't see anything about limiting the principal. My theory is that banks started offering higher principal loans, with less security to unshackle prices. If more people can suddenly "afford" a $1m house, demand pushes the price up to $1.2m. Bigger loans. Bigger profits. If you're only looking at repayments in a time of low interest, that's going to cause a lot of irresponsible lending, and a lot of price inflation. And in Australia this is particularly true because they're not just filling up with immigrants, they're deliberately poaching skilled workers who immediately hit the mid-to-higher-end house market, without the multi-generational lag of typically poorer, asylum-seeking immigrants. It's made everyone with property rich. It's made everyone with developable land insanely rich. And the economy there bubbles on with that cyclic investment. But what happens when you reach the cap and the lower working class can no longer afford to live there? Immigration has only been so high because people can afford to move there. This keeps coming back to the money. All these problems are caused by finance.