Yabby, so many home buyers have very little equity. If that equity goes very far negative our friendly banks will be there calling in the loan.

My sister in law struggled to keep up payments on a house she & her husband built at the top of one of the little bubbles about 15 years ago.

The bank became very nervous after he died, & although she was never behind in payments, they pressured for her to increase her equity.

The pressure became too great, & as soon as she could she got out.

After paying 10% deposit, & six years of payments, after selling, & legal costs, she had $1,200, to show for the effort. If she had sold a year or more earlier, she would have been left with a debt.

This was not any great downturn, not the 20 to 30% reduction in prices/values needed to make current stock viable to first home buyers. That sort of reduction would see the banks moving in on tens of thousands of otherwise successful home owners.

*If that equity goes very far negative our friendly banks will be there calling in the loan.*

Not so Hasbeen. If you have a 30 year home loan, then that is what
you have. Banks cannot call in the loan, unless you don't make
your payments.

Where some people get into trouble, is that they go to these
seminars, which tell them that owning 10 houses with small equity,
is the way to Nirvana. Many of those loans are short term,
not long term home loans.

So those speculators will indeed get into trouble. They are
quite distinct from home owners who meet their payments.

When demand outstrips supply, prices will rise.

Economics 101.

Think of the many forces that have increased demand over the years since "a reasonable house cost about 5 years average salary."

The country has become more prosperous. Individuals have become more prosperous, and have decided that they would like to demonstrate that prosperity with a bigger house. Or one that is closer to the CBD. Or (gasp) has waterfront views, across to the Opera House. This increases demand.

And there are many more overseas companies operating here than in the 60s, with ex-pat management who like their company to billet them in a bigger house. Or one that is closer to the CBD. Or (gasp) has waterfront views, across to the Opera House. This increases demand.

As well as this "demand for better" that increases the prices at the top end, which naturally has a flow-on effect down through the chain, we have growing families. They also look around for somewhere to live, can't be arsed to wait till the old folk cark it, and release more demand into the market.

What happens? Prices will increase to the point where demand and supply are in equilibrium.

Conversely, if someone wants to sell their property, and their buyers can't afford it, the price will decrease to a point where they can.

Which is why I maintain that there is no such thing as housing unaffordability. Whenever a house is sold, it is, by definition, affordable.

If, of course, there is some outside influence brought to bear, such as a government that decides to allow people who cannot afford to buy, to buy, by tilting the market (hello, USA), then there will be a brief period where this equation doesn't apply. But it will always correct itself (hello, GFC).

The most effective way to stabilise the price of houses is to increase supply. Or if that's politically unacceptable, increase unemployment by 20%. That'll slow demand, quick smart.

But whatever, you can't mess with Economics 101. It always wins in the end.

"As Houllie points out, what has changed is expectations. The
average house is now twice the size that it was in the 60s."

It seems odd to make such a statement. It makes no sense. Look at the shoe box developments close to the city. There is no shortage of demand for this type of housing. The reality is that with all the restriction people dont have much choice.

A Big Mac type of affordability index would be useful. While posters can make Marie Antoinette like comments about housing affordability, it does not alter the fact that house prices are at historically high levels.

*It makes no sense*

Fester I can only quote you the commonly quoted figures in the
press, and they claim that houses have gone from something like
13 squares to 25 squares.

Right now, quite frankly, I can't even be fagged to dig out the
stats, but they float around in the press fairly constantly.

I'm not sure about your dogboxes, but I assure you that 4 by 2s with
every mon con, remains what today's woman wants and they continue
to build them as fast as they can. Perhaps they are not
classified as houses, more like units or similar.

If it's an issue, I am sure that the ABS can explain, how they
calculate the figures.

You are right Houellebecq.