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

Housing Prices, Mortgage Interest Rates and the Rising Share of Capital Income in the United States – Gianni La Cava

Submission to the Inquiry into Home Ownership

Is Housing Overvalued? – Ryan Fox and Peter Tulip

Over to you! 


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As house prices fall across Australia, should we be worried for our economy?

Tue, 13 Mar 2018

This article first appeared on the Yahoo7 Finance website at this link:  https://au.finance.yahoo.com/news/house-prices-fall-across-australia-worried-004714571.html 


As house prices fall across Australia, should we be worried for our economy?

Are you a home owner?

If you are in Sydney, Perth and Darwin, you are losing money at a rapid rate.

In Melbourne and Canberra, prices are topping out and there is a growing risk that prices will fall through the course of this year. If your dwelling is in Brisbane or Adelaide, you are experiencing only gentle price increases, whilst the only city of strength is Hobart, where house prices are up over 13 per cent in the past year.

The house price data, which are compiled by Corelogic, are flashing something of a warning light on the health of the housing market and therefore the overall economy. For the moment, the drop in house prices has not been sufficient to unsettle the economy, even though consumer spending has been moderate over the past year.

The importance of house prices on the health of the economy is shown in the broad trend where the cities that have the weakest housing markets tend to have the slowest growth in consumer spending and are the worst performance for employment and the unemployment rate. The cities with the strongest house prices have strong labour markets and more robust consumer spending.

Trump could cause the next global recession: here's how

Wed, 07 Mar 2018

This article first appeared on the Yahoo7 Finance website at this link: https://au.finance.yahoo.com/news/trump-cause-next-global-recession-heres-233953884.html 


Trump could cause the next global recession: here's how

The Trump trade wars threaten the global economy. This is not an exaggeration or headline grabbing claim, but an economic slump based on a US inspired global trade war is a distinct and growing possibility as it would dislocate global trade flows, production chains and bottom line economic growth.

Up until a few weeks ago, there was a strong enthusiasm for the economic policies of US President Donald Trump. Tax cuts and planned infrastructure spending were seen to be good for the US and world economies. US stocks and many around the rest of the world rose strongly, to a series of record highs. At the same time, bond yields (market interest rates) surged as the market priced in interest rate hikes and inflation risks from the ‘pro-growth’ policies. It was seen to be good news.

Very few, it seems, were worried about the consequences for US government debt and the budget deficit from this cash splash, especially when the US Federal Reserve was already on a well publicised path to hiking interest rates.

About a month or two ago, a few of the more enlightened and inquisitive analysts started to focus on the fact that the annual budget deficit under Trump was poised to explode above US$1 trillion with US government set to exceed 100 per cent of annual GDP.

A debt binge fuelled by tax cuts was a threat to the economy after the temporary sugar hit.