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The Forum > Article Comments > Popping a housing bubble fantasy > Comments

Popping a housing bubble fantasy : Comments

By Christopher Joye, published 7/7/2011

Australian house prices have arrived at the 'new normal'.

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affordable (to the tenant) level, a level that relates to the price they paid, rents will come down, and bring with them a lowering of the property price.
Pericles,
Sorry,
I misread about the economist. However, where I live the Qld Government sold all Departmental housing & is now renting it back at insane cost. Local people have to leave the area because they can't possibly afford to buy & pay rates. Due to the Govt policy of paying whatever the landlords ask the rates have gone through the roof. The property prices are past insane.
Posted by individual, Friday, 8 July 2011 7:53:44 PM
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As a supplier to the domestic construction industry, I can say unequivocally that in Brisbane at least housing construction has been effectively at a standstill for at least 12 months.

At the same time, I have noticed a big increase in expensive signage being used to advertise rental houses, even including one quite ordinary 4 bedroom house I saw with photos on the sign, which must have cost a heap. This sort of thing used to be reserved for homes on sale, not merely for rent, so what's driving it?

Given that construction is at a standstill, if there is difficulty renting houses it can only mean that people are being accommodated in other ways, so I suspect the glut of flats and townhouses that Brisbane was experiencing for a while is now being addressed on the demand side. In Brisbane this effect is being exaggerated a very little by the people who have been renting short-term whilst their flood-affected property is made habitable.

I do think we're heading for an extended contraction in the detached-dwelling market that probably won't end for years. An average home is simply too expensive for average young families and so they have to vote with their wallet for cheaper alternatives. This is not optional. If and/or when prices fall to a level at which a storeman married to a checkout operator can afford to buy, as used to be the case, then demand will increase again. I can't see the speculators allowing that.
Posted by Antiseptic, Saturday, 9 July 2011 4:57:37 AM
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I can't see the speculators allowing that.
Antseptic,
What I don't understand is why Government doesn't put a lid on this evil practice of speculation ? They do it on everything else ?
Speculation is not investment. Speculation is denying others & stifling society building. We now have the evidence that speculation is merely a short-term profit maker for a few who don't pay adequate tax.
Posted by individual, Saturday, 9 July 2011 9:09:22 AM
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It might be instructive if you were to define "speculator" for us, Antiseptic and/or individual.

>>I can't see the speculators allowing that.<<

>>What I don't understand is why Government doesn't put a lid on this evil practice of speculation ?<<

I think you might mean "investors" and "investing".

Buying land in the hope that you can find gold is speculation.

http://www.nullarbornet.com.au/towns/kalgoorlie.html

"1897 saw the Kalgoorlie Boulder gold fields riding the crest of an investment wave largely financed by British speculators. The stage was set for the creation of a highly capitalised modern gold mining industry. Literally hundreds of companies were floated, fortunes were won and lost..."
Posted by Pericles, Saturday, 9 July 2011 10:47:52 AM
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Pericles, I call it speculation because it has been driven by an expectation that prices would continue to increase, rather than based on market fundamentals. If ordinary families have been priced out of the market for ordinary houses in ordinary suburbs, then there is something wrong with the fundamentals, since the reason those houses exist is for ordinary families to live in them.

The fact that Governments artifially support house prices by witholding land releases only adds to the case. I'm sure you'll tell me this is all OK, because otherwise there would be no investment, or some such thing, but it's hardly free-market stuff, is it?
Posted by Antiseptic, Saturday, 9 July 2011 12:23:12 PM
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Antseptic,
Ditto. There's an explanation for you Pericles.
Posted by individual, Saturday, 9 July 2011 12:46:39 PM
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