Foundation and Mecurius,

Methinks you two are HIA moles.

It is a standard response by developers to claim that anyone who raises population growth as an issue is zenophobic.

Sorry mates, no one is sucked in by this empty argument anymore.

Is a zenophobe scared of buddhists?

:-P

I think the HIA and myself have very different ideals... They would probably hate to see house prices collapse by 30-50% across the entire nation.

Can you actually dispute my claim using hard statistical evidence?

I'll repeat, there is no statistically significant correlation between the RATE of population increase and the RATE of house price increases.

And if you seriously believe that it is an excess of population over dwellings that has caused the current affordability crisis, should you not be blaming the declining size of households rather than population increase? After all, our current rate of roughly 170k new dwellings per year (down from 210k pa at the peak of the housing boom) should adequately house the population increase of what, 240 thousand per year. No?

Excessive credit creation and lending, with lax standards, enabled this boom. Government policies (FHOG, neg-gearing, CGT discounts and avoidance (reno & flip the PPOR; rinse repeat, the 6-year rule etc?)) encouraged it. The media were payed to promote it, and the public reacted stupidly, naively and with the kind of irrational hysteria described in "Extraordinary Popular Delusions & the Madness of Crowds".

f

daggett, I know this is digging over old ground, but there still seems to be a view that affordability is some kind of absolute measure.

>>all the evidence I am aware of, and my own personal experience, tells me that the cost of housing has gone well beyond what even middle class people can afford<<

If that is the case, who is buying?

"All the evidence" also suggests that sales of electronic equipment such as wide-screen TVs and home entertainment systems driven by PCs have never been higher.

"All the evidence" suggests that Australians continue to spend an increasing amount every year on overseas holidays.

"All the evidence" suggests that sales of SUVs (until recently halted by the price of fuel) have been steadily increasing.

Yet "somebody" still has the wherewithal to keep buying up these houses, despite the fact that they are "well beyond what even middle class people can afford"

It might just help us along if someone gave a working definition of "unaffordable".

>>As a consequence, a far more wealth than ever before is being taken out of our pockets and put into the pockets of those in the massively bloated private property sector and associated upstream and downstream industries.<<

A broad claim. Care to give it some dimensions? Are developers making more or less money than they did (say) in the 1960s? And who exactly are the "upstream and downstream industries"?

"If that is the case, who is buying?"
Those who owned a house before the boom and have 'withdrawn equity' (used it to secure further debt) to upgrade to bigger houses, buy holiday houses and investment properties.

Yes, as a whole, we are spending record amounts of money on electronic goods, holidays, 'SUV's etc. But by and large this is debt-funded rather than savings funded. How often have you heard somebody say "we finally took that trip to Europe after spending 10 years saving the $15,000 it cost us"? It doesn't happen. It's all put on plastic or MEW'd or put on plastic and then 'consolidated' later into personal or mortgage debt.

"It might just help us along if someone gave a working definition of "unaffordable"."

Unaffordable is when those who don't already own a house cannot afford to purchase one of decent standard without taking on crippling debt.

Alternatively,

A related Rational Pricing test would be – what proportion of home-owners could afford to purchase the house they currently occupy at current prices, assuming zero equity in other real-estate and only their savings as a deposit?

This index would be fascinating, and I believe currently at a staggering record low.

Foundation wrote (http://forum.onlineopinion.com.au/thread.asp?article=4834#54125): "I'll repeat, there is no statistically significant correlation between the RATE of population increase and the RATE of house price increases."

As I have already shown above (http://forum.onlineopinion.com.au/thread.asp?article=4834#53462), property speculators disagree.

On Pages 56-60, in her submission to the 2003 Victorian Government Housing Affordability Inquiry (http://www.candobetter.org/sheila/spaVicAffordableHousingEnquirySub153.pdf - 1.58MB), also referred to above, Sheila Newman quotes Steve Kropper, Vice-President for Strategy at Primedia, which owns http://realestate.com in regard to the US:

"I offer the following simple explanation of why I do not anticipate a fall in housing prices. It has to do with sex in foreign countries. If people keep having babies abroad (safe prediction) and they see America as the promised land, so long as our immigration flood gates remain open, then demographics, the fundamental driver behind US housing growth guarantee that prices will not fall."

"... And immigration provides demand side pressures that support housing growth and the current price levels. Population growth benefits the value of our homes, but devours open space and wills a more crowded America to the next generation. Our children will have to worry about disappearing cornfields in Fort Collins, golden hillsides in Vista, leveled woodlands in suburban DC and filled wetlands in Fort Meyers.

"As a key driver of housing growth, and price rises, immigrants and home prices are safe as there is no national plan or consensus to change our immigration policy. There is no likelihood that the gates will be closed on immigration, a key driver in housing demand."

On page 63, Newman demonstrates the correlation between population growth in different Australian states and property prices:

"Note that the prolonged flatness of prices in Melbourne coincided with outward interstate migration from Victoria to Queensland and other places (where prices rose). In these areas the property development industries took advantage of the relatively low land prices there to purchase land and resell it to builders and home buyers as the flight from Sydney's high prices produced new home buyers in Northern coastal NSW and Queensland."

This relationship was accepted in the final report from the Inquiry.

Sustainable Population Australia... no hidden agenda there then!

I'll give the report a thorough review tonight. At a glance though, it looks as though it might be more of a skewed literature review (as in presenting only literature supporting their predetermined argument) than robust, statistically supported analysis.

I'll also redo my correlation analysis using % change in:
1) house prices
2) population
3) interest rates
4) general price inflation
5) capital gains taxation
6) rental yields
7) wages
8) GDP
9) housing debt
10) housing stock
11) housing turnover

% change will be assessed over 1 year, 2 year, 5 year and 10 year intervals for the last 35 years. I'll report back my results.

As a general curiosity, if immigration is exceeding housing construction, and thus causing demand for houses that exceeds supply, thus causing high house prices and low affordability, why is it that only house prices appear to be affected, not rents? Do immigrants have a higher preference for house purchase than born citizens? If it can be shown that the exact same periods of ‘high immigration’ (relative to what?) quoted in the SPA submission coincided with falling rental yields, does this not shred their argument?