Daggett,

Re, your enquiry:

“I do differ with your apparent view that immigration-driven demand is not the major driver of housing hyper-inflation.”
“surely you can appreciate that housing prices should not be in direct linear proportion to the this country's population?”

Yes I can appreciate that.

There would be a ‘multiple’ as you suggest. As to whether I believe that multiple would be of a magnitude that would transform a single-digit population increase into a near tripling of house prices within a few years, the answer is clearly, absolutely & unambiguously – no.

The reason for this lies in the nature of supply & demand in different markets.

In consumer markets that sort of inflation only occurs in the case of necessities (“inelastic” demand) that are also
consumables/perishables (consumed & replaced daily eg. food or petrol)
when there is an extraordinary supply crisis
(availability decreases in absolute terms).

Rather than being consumable the available supply of housing is relatively permanent. It is virtually never reduced (earthquakes & missile strikes notwithstanding) it constantly increases - your point being that the population has increased at a faster rate.

However the (relatively gradual) pattern of population increase over time bears no direct relation to the sudden & volatile nature of the price bubble.

There is however one form of market where phenomenal price growth rather than being extraordinary is commonplace – investment markets. The stock market for example where the price of a stock quite often exceeds its fundamental value due to speculative investment. This also occurs in housing.

For a quick insight I refer you to Investopedia’s definition of “Housing Bubble”

http://www.investopedia.com/terms/h/housing_bubble.asp

For a greater insight I noticed that Wizofaus referred you to Robert Shiller and his book "Irrational Exuberance"

http://en.wikipedia.org/wiki/Irrational_Exuberance_%28book%29

I also refer you to the article that inspired this thread (&my posts on pages21&22).

For the inflationary significance of increased population (relative-to-supply) rental vacancies & rents are your best indicator. Tenant demand is solely consumer demand.
Rents have increased but nowhere near as much as prices. The discrepancy between rent & house-price increases indicates the level of speculative excess

True-to-form Yabby,

Re. significance of “cheap and easy ]credit”

I refer to paragraphs 13, 15 & 19 of the aforementioned
(Executive Summary of the)
Reserve Bank’s submission to
the Productivity Commission Inquiry on First Home Ownership.

http://www.rba.gov.au/PublicationsAndResearch/SubmissionsToParliamentaryCommittees/productivity_commision_inquiry_on_first_home_ownership.html

I largely concur with them.
_________________________________________

Re. significance of “great salaries” on property prices:

I remind you of the quote from this article -

“City house prices easily outstrip wages” ( Financial Review 25/9/07)

as it appears on Page 14 of this thread.
______________________________

As for the repetitive loop phenomenon, I’m not sure whether its method or madness.

-Mr Smith

Smithy, indeed the RBA document makes some very valid points! Their focus
is on the word “investors”, not speculators. That’s why I think the wording
of this thread is wrong. If you read paragraph 9, they concur that there are a number
of factors affecting the market, which has been my point all along.

Now at some point you have to think beyond what the rba are saying and look at
solutions. You as some would, would prefer to punish investors for saving etc.
I prefer to wonder why they are so focussed on housing for their savings.

Fact is people want something that is safe, tax effective and copes with the
effect of inflation eating away at hard earned savings, or its easier just to live
it up and spend the lot. Housing is at present the best option, why not give
people other options?

Given that our current account is what it is and that increased savings could
change it dramatically, why not provide some carrots, rather then your stick?

If Wiz’s sister saves 50 K$ for her home, any interest is taxed at the maximum
marginal rate, inflation eats up the balance. Where is the incentive to save?

Why not make the interest on the first 100k$ saved for home ownership, tax exempt?

Why not index interest on bank deposit returns for inflation, so that people are
compensated for inflation loss? Give people incentives to save and they will do
so, which can only be good for our current account. Carrots work much better
then sticks.

Daggett, the liberals, labour, the Chinese, Russians (Gorbachev) have all realised
that market economics is not perfect, but is the best option available.

It seems that even your old friend Fidel, is coming around slowly, after all this time.
He declares himself a “utopian socialist”, but of course there is no utopia, just the
reality of this world.

http://news.bbc.co.uk/2/hi/americas/7163672.stm

Market economics where allowed, is working in Cuba

http://news.bbc.co.uk/2/hi/americas/6923717.stm

Keating once wisely commented “in the race of life, always back self interest”

Very true, don’t kid yourself that it’s not.

Yabby, I've already explained that saving deposits is simply not the problem for many first home buyers, and certainly not for my sisters. I'm fully in support of changes to tax laws to encourage more saving, but that alone is not going to help much in the current market.

Market economies are definitely not perfect, but that doesn't mean they can't be improved with good regulation. Speculative bubbles are one of the worst forms of market failure, and it is absolutely worth trying to find means to keep them in check, even if inevitably mistakes will be made in trying to do so.

I see that Yabby has, yet again, chosen not to answer my question as to why someone, such as himself, who supports extreme free market policies should be able to pass himself off as politically 'mainstream'.

Other points to which Yabby also seems to be experiencing difficulty in responding include:

* His statement "its pointless to stress oneself over the things that cannot be changed", immediately contradicted in the following paragraph.

* His claim to be a 'forceful' advocate of family planning whilst clamouring to increase WA's population through immigration.

* On the one hand he acknowledges the parlous state of the earth's ecology, but on the other he revels in the consumerism and exploitation of natural resources which is its cause.

---

Yabby wrote, "The market has been driven by cheap and easy credit ... Given that more people are earning great salaries and that population has grown, why should it be surprising that in some areas, houses have hugely expensive?"

In other words, these factors help to fuel Australia's housing hyper-inflation.

Well, Duhhhh!

The point, that the private property sector is sucking unearned wealth out of the rest of Australian society through its monopolisation of an essential commodity, all of which was originally crown land, still stands. This would not be the case if the housing sector had not been privatised.

Yabby wrote, "WA needs people to develop these projects. If Eastern States people don't want the jobs, we'll just have to bring them in from overseas."

If Yabby had intended to discuss this issue honestly, he would have acknowledged that this argument has already been put and countered over and over again in another forum, "Skills shortage imported workers vs local" at http://forum.onlineopinion.com.au/thread.asp?discussion=1040#18679

In any case, why does WA 'need' to develop these projects NOW? Why can't they be deferred? Why the insane rush to immediately dig up and export every possible tonne of minerals in order to fuel global warming and pollution, whilst disfiguring our own landscapes (http://lee.greens.org.au/index.php/content/view/1354/65/ http://lee.greens.org.au/index.php/content/view/1353/65/ http://lee.greens.org.au/index.php/content/view/1352/65/ http://lee.greens.org.au/index.php/content/view/1351/65/ http://lee.greens.org.au/index.php/content/view/1350/65/ http://lee.greens.org.au/index.php/content/view/1349/65/ http://lee.greens.org.au/index.php/content/view/1348/65/) and depriving future generations of those resources?

Whilst this may seem to some to be tangential to the discussion, the article:

"Is it reactionary to oppose immigration?"

... published on Margo Kingston's Webdiary on 19 Dec 2007 at:

http://webdiary.com.au/cms/?q=node/2240

... may be of interest.

In spite of the article having attracted 149 comments so far, the debate does not appear to have been spoilt by repetition and various other debating tricks.