Housing affordability - get the facts right and the right facts

Wed, 08 Mar 2017  |  

I continue to wonder why the super-charged debate on Australian housing is so devoid of reliable facts and analysis. So much of the debate relies on privately manufactured snake oil, made up of unproven survey results, pretend numbers, factual errors and sweeping generalisations that fit into the "OMG I'll never be able to buy a house" narrative that generates lots of clicks and unleashes pent up anger. The media, or a large part of it, love these 'crises' and report the snake oil without doing any background checking or research to see whether the report they are covering is in any way accurate. 

So little of the news, reporting and commentary makes reference to the comprehensive, in depth, reliable, considered and unbiased research of the RBA.

While house prices are not a direct policy aim of the RBA, distortions in the housing market can have consequences for the marco economy, inflation and financial stability, which is why it spends a lot of time researching the issue and, thankfully for those with an open mind, the RBA published much of its findings.

For those interested in housing and who are eager to understand the issues, can I suggest the following articles, rather that the tosh published by headline grabbing spriukers. It might take a little time to read and take in all of the information, but if you at least read these articles, you will be better informed. 

Opening Remarks to Plenary Panel at the Australasian Housing Researchers Conference – Luci Ellis
https://www.rba.gov.au/speeches/2017/sp-ag-2017-02-16.html 

Housing Prices, Mortgage Interest Rates and the Rising Share of Capital Income in the United States – Gianni La Cava
https://www.rba.gov.au/publications/rdp/2016/2016-04.html 

Submission to the Inquiry into Home Ownership
https://www.rba.gov.au/publications/submissions/housing-and-housing-finance/inquiry-into-home-ownership/ 

Is Housing Overvalued? – Ryan Fox and Peter Tulip
https://www.rba.gov.au/publications/rdp/2014/2014-06.html 

Over to you! 

 

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THE LATEST FROM THE KOUK

The Australian stock market is a global dog.

Sat, 24 Jun 2017

This article first appeared on the Yahoo7 web page at this link: https://au.finance.yahoo.com/news/1381246-234254873.html 

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The Australian stock market is a global dog.

At a time when stock markets in the big, industrialised countries are zooming to record high after record high, the ASX200 index is going no where. So poor has the performance been that the ASX is around 20 per cent below the level prevailing in 2008.

It is a picture most evident in the last few years. Since the middle of 2013, the ASX 200 has risen by just 10 per cent. The US stock market, by contrast, has risen by 50 per cent, in Germany the rise has been 55 per cent, in Canada the rise has been 20 per cent, in Japan the rise has been 45 per cent while in the UK, with all its troubles, the rise has been 15 per cent.

So what has gone wrong?

Tony Abbott and debt

Fri, 16 Jun 2017

With Tony Abbott and governemnt debt hot news topics at the moment, I thought I would repost this artricle which I wrote in April 2013:

Enjoy, SK

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Here’s a true story. It’s about a man called Tony.

Tony is a hard working Aussie, doing his best to provide for his family. He has a good job, but such is the nature of his work that his income is subject to unpredictable, sharp and sudden changes.

Tony’s much loved and wonderful children go to a private school and wow, those fees that he choses to pay are high. He used to have a moderate mortgage, especially given he was doing well with an income well over $200,000 per annum.

Then things on the income side turned sour.

Tony had a change in work status that resulted in his annual income dropping by around $90,000 – a big loss in anyone’s language.

How did Tony respond to this 40 per cent drop in income?

Well, rather than selling the house and moving into smaller, more affordable premises, or taking his children out of the private school system and saving tens of thousands of after tax dollars, Tony called up his friendly mortgage provider and refinanced his mortgage.

In other words, Tony took on a huge chunk of extra debt so that he could maintain his family’s lifestyle. No belt tightening, no attempt to live within his means, just more debt.