Daggett “People who have the means to acquire commodities cheaply that may be needed by others at a later point in time do so and charge higher prices when others are in a position to buy. “

Now lets put this another way, when the market is “falling” the bad speculators “buy” in a flurry of “counter-cyclical” enthusiasm, thus breaking the free fall and stabilizing the market price. Conversely, when the market is “rising” the nasty “speculators” off-load their property and thus, satisfy the demand, leading to a flattening of a price spike before it reaches its peak. I would suggest the actions of such “speculators” almost warrants public recognition of their services in the “stabilization of market forces”

”Speculation creates no wealth in its own right and, as such this form of activity is a burden on the rest of us. In a healthy economy, there would be very little room for speculation”

On that basis, many things would qualify as “creates no wealth in its own right”. The only “burden” is the one a free individual chooses to pick up. The health of an economy could almost be measured by the amount of speculation being undertaken.

No oil well was ever pumped oil without a speculator pushing venture capital into the drilling of “dry-holes”. No medical breakthrough was every developed without a pharmaceutical company trialing a thousand failures. No successful music CD was ever heard without the recording company publishing 16 failures.

The property market is no different to the oil, pharmaceutical or music market. In fact, with more individual participants on the “supply side” and at least as many on the “demand side”, than any of the other examples, it has fewer imbalances, is thus less susceptible to “speculative forces” and is, thus, closer to a “perfect market” environment.

The motive force for all commercial endeavour is found in “speculation” of one sort or another.

Anyone who is so dismissive of “counter-cyclical speculation” has, obviously, no understanding of how a healthy economy really works.

“the more likely explanation, that is, that what you have written is gibberish.”

Ah yes, love your humour. Dagget, http://www.socialresearchmethods.net/kb/statcorr.htm is a good primer for correlation & significance.

“As in all hypothesis testing, you need to first determine the significance level. Here, I'll use the common level of alpha = .05. This means that I am conducting a test where the odds that the correlation is a chance occurrence is no more than 5 out of 100.”

In the data referenced above, the p=0.62 indicates that the odds of the (weak) correlation being coincidental are 62%. Any scientific hypothesis relying on a correlation that is probably chance would be instantly discredited.

I know it is a quote, cut and pasted as evidence for an answer to the inquiry question:

“To what extent has immigration influenced overall housing demand? Has it been a significant factor in the recent surge in housing prices?”

The submission also relies upon 2 additional supports in answering the question. The first “Dynamics of Immigration-fed demand and how it links with prices in Australia” relies on an assumption that increased demand for dwellings cannot be offset by increased building, and of course those graphs. The “how it links with prices” bit I couldn’t find.

The France comparison theory has been proven invalid by its recent boom as evidenced by The Economist:
http://www.electroniceconomist.com/images/20060909/CFN289.gif
France HPI 120% over 10 years versus our 126%.

I’ve updated those charts for you Dagget (please pass them to Ms Newman):

http://203.26.51.178/cracker/138813_2.jpg simply overlays the two charts comparing high-population and low-population growth cities, removing the scale-skewness of the originals. Still so cut and dry?

http://203.26.51.178/cracker/138813_3.jpg adds in another 3 years of data. Suddenly the theory looks more shakey. Certainly Ms Newman’s “low-population growth cities” appear to be following exactly the same trend as the “high” ones. In fact Hobart prices continued to rise even while their population was DECLINING during the late 90s and early 00s!

http://203.26.51.178/cracker/138813_1.jpg From the US FedRes shows that French prices did not return to trend as Ms Newman ‘hoped’. In fact they boomed as did ours.

Yes Kanga, BIS & Mellor do have a patchy record as far as forecasting house prices (not to mention IR%s!). As you pointed out, on July 31, RM stated:

"Well, I still think over the next few years in an environment of very strong economic growth, very strong population growth, that we're still going to see quite strong house price growth. Maybe not up around 20% per annum we've seen over recent years but we still could be seeing 10% per annum plus..."

He was wrong of course. The boom was already slowing by 07/03.

4 months later he'd changed his tune...

"7:30 Report 04/11/2003

TIM LESTER: Robert Mellor sees an INEVITABLE CRASH LANDING.

ROBERT MELLOR: At the moment, our view is rates could go to 10 per cent by the middle of 2006.

Without a doubt, by that point in time it will stop the market, particularly the residential market, stone dead and ultimately will send the economy into a recession some time in 2007."

Although that last stanza may prove to be his most accurate forecast...

- - - -

Abelson et al studied explanations of house prices, concluding "Consistent with economic theory, we find that in the long-run real house prices are determined significantly by real disposable income, the consumer price index, unemployment, real mortgage rates, equity prices, and the supply of housing."

Abelson P, Joyeux R, Milunovick G, and Chung D. 2005 : HOUSE PRICES IN AUSTRALIA: 1970 TO 2003 FACTS AND EXPLANATIONS, Macquarie University

- - - - -

Any number of stats can be found embedded in this document from the REIA - page 15 chart (right click, chart object, Open. Whoops):

http://www.reia.com.au/documents/Property_Profile_2004-05.doc

- - - - -

And the Victorian gov’t has supplied me this publication:

http://land.vic.gov.au/ ->Property Victoria -> Edition 12 November 2005

which has city versus rural prices 1985-2005.

Indexed to 1985=100, the chart looks like this:

http://img222.imageshack.us/img222/2231/melbournevsruralprices852005index10085hd4.jpg

and as an annual percentage:

http://img220.imageshack.us/img220/2849/melbournevsruralprices852005realannualtz8.jpg

Once again, no sign of the alleged/expected huge gulf between high-migration city areas and the bush… it doesn't even resemble Ms Newman's... Hmmm. The VicGov or SPA?

Foundation,

"Manipulated?"

The figures you attempt to correlate do not measure any relationship between population movement to and within Australia and land for housing prices here.

Your interpretation of my quote regarding regional migration is incorrect and contextually unfounded. If there were no in-migration to those regions it would not matter what the capacity to pay was.

Report p.59 "Findings"

"Growth in immigration since the mid-1990s has been an important contributor to
underlying demand, particularly in Sydney and Melbourne."

No-one on the forum claims that OVERSEAS immigration is the ONLY cause of RECENT high prices.

BUT it is the underlying driver of related population MOVEMENTS between states and within states which cause turnover & pressure related surges of demand to overlay Australia's natural increase rates. The Report supplies some information for the 4 years that Newman did not graph:

p.61: "At the state and territory level, as well as natural increase, population growth includes net immigration and net interstate migration. The combined effects of these two latter components of growth is shown in figure 4.3 for NSW, Victoria and Queensland. All experienced net inflows of population over the life of the current housing boom, with the strongest growth occurring in Victoria."

Immigrant and visitor arrivals

pp 64-65: "Net immigration is (…)an important component of population growth in Australia and has increased from a low point in 1992-93 (see figure 4.2). The ABS estimates that in 2002-03 there was a net gain of 125 000 persons through permanent and long-term movements. (…) more than four times the level in 1992-93, double the average net immigration level in the first half of the 1990s, and approaching the previous peak reached in 1988-89.

While the extent of the recent increase may be overstated by ABS net immigration estimates (see box 4.2), immigration has clearly added to demand. Moreover, housing demand will have been boosted in recent years by short-stay visitors who are excluded from the estimates of net immigration, but who have similar housing requirements to the resident population (see box 4.1)."

Apology owing.

“The figures you attempt to correlate do not measure any relationship between population movement to and within Australia and land for housing prices here.”

It was not “my attempt to correlate”. It formed a significant part of Ms Newman’s submission, which has been described here as “irrefutable” (which it isn’t) and “incontrovertibl[e]” “evidence” (which it isn’t), “far beyond the usual fudge” (bwahahaa!), “perfetly logical and clear” (huh?), its evidence “accepted” (which it wasn’t) by the commission.

This is why I’m refuting and controverting it by showing the ‘evidence’ does not exist or is false, that the report is fudge, whipped up by an anti-immigration-lobby group, and that it was NOT accepted as fact by the PCA. Their report consistently states that population growth was NOT an important factor in the recent house PRICE boom, as I’ve shown.

- - - -

“Net immigration is (…)an important component of population growth in Australia” etc.

Self-evident, but irrelevant. You need to understand the difference between population growth and house price growth. (Clue – one involves people and one, money).

“…housing demand will have been boosted in recent years…”

Self-evident, but irrelevant. You need to understand the difference between housing growth and house PRICE growth. (Hint – one involves houses and one, money)

“Apology owing”

My mummy says you should say sorry first. Seriously, how old are you?

Ma’am, sorry for what exactly? I have never disputed that as the population grows, more dwellings are needed. These dwellings have been built, in fact built to excess. The supply/demand equation is in a rough equilibrium.

Surely it is up to YOU to prove the link between population growth and INCREASED HOUSE PRICES?

“BUT it is the underlying driver of related population MOVEMENTS between states and within states which cause turnover & pressure related surges of demand”

With equilibrium in the TOTAL supply / demand, a localised surge of demand forcing up prices would be offset by a n equal and opposite reaction (drop in demand) where they had come from. This boom has been so all encompassing as to prove this did not happen.

Foundation(http://forum.onlineopinion.com.au/thread.asp?article=4834#55786),

I did understand what correlation is. The term I should have used was 'sophistry' rather than 'gibberish'.

Just a few points:

On Japan(http://forum.onlineopinion.com.au/thread.asp?article=4834#55661):
surely the most striking statistic is the enormous cost of land in Japan rather than the fact that a fall in housing prices may have accompanied a rise in the population of Japan and vice versa. I would suggest that the high cost of land has a lot to do with population density.

You quoted from the report above but tried to present the quote as saying something different to what it said(http://forum.onlineopinion.com.au/thread.asp?article=4834#55689):

"Population pressures HAVE NOT CONTRIBUTED GREATLY to the demand surge that has caused affordability in the capital cities to decline sharply over the last year or two."

We are arguing that population growth fuels housing inflation over the longer term and you 'refute' that with one quote from the report referring to "the last year or two"?

Of course, factors other than population growth helps to increase prices on occasions, including opening up Australian real estate market to the Internet, as I have acknowledged.

The other significant point you have refused to address is the cost to the environment and in terms of the destruction of natural capital of building the housing(http://forum.onlineopinion.com.au/thread.asp?article=4834#53620). Of course, if we completely disregard that, as many economists do, it will no doubt be possible to point to statistics which show the addition of more people magically creating more housing.

However, we cannot.

At the moment State governments are rightly resisting John Howard's call to simply release as much land as is necessary to meet the demand with all the environmental destruction that would entail.

I am sorry, but for now, I am unable to turn myself inside out trying to follow all the logic in the remainder of your arguments.

For a far more clear explanation of what has happened in the housing market in recent years, I again strongly recommend that they read for themselves Sheila Newman's submission and her thesis. Links to these documents can be found here:

http://www.candobetter.org/sheila