Agree with most of what you are saying, the bit about our children paying for our greed, is a bit off!!!!
I know a lot of people in their late 50's, most are tradesmen, that haven't a lot of money.
You have to remember that most of these guys have less than $100k in super and don't own their house.
Just because house prices where pumped up by the real estate agents, doesn't mean all the baby boomers jumped into debt to buy houses and made a killing.
Most grew up in hard times and were risk averse and didn't capitalise on the opportunities that were available. Some did but would have been burnt in the G.F.C.
I guess what I am getting at is there is not a lot of "normal baby boomers " out there,that I know,that don't have a lot of money.
The baby boomers are constantly demonised for the rise in house prices, but I feel the problem was caused by the real estate agents cranking prices, to increase commissions.
Most sellers look to the agents to give them an indicative price, the agents worked out just slowly ratchet the prices and you get a ponzi scheme happening.
Well now the elastic band is streched as far as it can go, everyone wants to blame somebody for the problem.
Greed was the problem but it was the real estate agents that caused the problem.
Most of the baby boomers who made a "killing" on their house, borowed money to buy another house.
I guess what I am getting at is, the greed wasn't as wide spread as some would have us believe.
IMO demographics is not the biggest factor influencing the world economy. Sure we have aging populations etc etc so what the biggest driver of economic growth is cheap reliable energy.
True perhaps, but energy is effectively a "gate".Ultimately the economy only exists because of people's wants and needs. And demographics is a key factor affecting those desires. It trumps cheap energy on first principle alone.
What a load of codswallop. Real Estate agents don't create the market, buyers and sellers do and market forces, primarily supply and demand will dictate price. Now as much as I would agree with you that real estate agents are pretty low down the food chain you can't blame them for the boom periods experienced in the housing sector.
The incidence of property investors whether they were baby boomers or not certainly influenced the upward trend in property prices as they soaked up supply.
The chicken and the egg. What came first ?Ultimately the economy only exists because of people's wants and needs. And demographics is a key factor affecting those desires. It trumps cheap energy on first principle alone.
O.K then, by your reasoning the boom should keep going, as the supply is declining but the demand is increasing. Lets see how that pans out.
Real Estate agents don't create the market but the have a lot of say in the pricing of the product.
Maybe you have a short memory, but I remember in 2005, 2006, 2007, every time I picked up a paper, it was covered in real estate propoganda.
Buy now before you miss out crap, bordering on hysteria, well now prices are at 7 times the average wage, the proverbial will hit the fan.
By the way, I don't think the Real Estate agents are low on the food chain, they are only doing a job. If they can see that people are prepared to pay more it is their job to keep moving the bar up.
It's a bit like when I go to buy a car, I have a change over price I want to pay. It doesn't matter whether I get $1000 or $10,000 or $50,000 as long as the change over is the same.
If increasing demand and diminishing supply were the case, we would find ourselves with increasing house prices. the fact that housing prices have stagnated and even retreated across australia(quite gradually mind you), would only and can only indicate that the demand just isn't there?
the funny thing is this propaganda you're referring to is exactly what has allowed the market to sustain the levels that it has already. in 2008/2009 with record low interest rates, and the media and real estate agents pumping first home buyers and investors with all the good news like the first home owners grant, people such as myself raced out and bought our first house. now when an entire generation such as the baby boomers has seen house prices do nothing but sky rocket, with the very occasional and short lived downturn, it is no wonder why the general thought amongst people is that "house prices ALWAYS go up".
so we went out on a limb and built our first house, within 18 months interest rates had soared back to their original values! with no kids we failed to see the point in paying more than 60-70% of my wage each week so we fortunately sold before the house had depreciated. we barely broke even! My point is that there are alot of gen y'ers that have done the same, and even those from generation x! thing is alot of others have just bought there first house for their family, and are unable to just cut their losses and get out.
once europe, america, and china all fall over, IMO it is the above situations that will lead to an even bigger drop in house prices than expected. all they have done is create another little bubble on top of a pre-existing bubble.
In EVERY other country, residents have stood up and said " Our house situation is unique and different, house prices will never fall here!" and they have and they will. Japan and the US are probably the two best examples of it, and in this upcoming crash Australia will most certainly not be immune.
IMO house prices are supported by three main things firstly the cost to build a house , second the land value which is a function of the services provided to that land and thirdly employment . To build a house costs what min 150k as for landand services, roughly in a 400 unit development the service costs in inner Sydney to connect power is about 15k. Water gas and telephone about the same so about 50 to 60 k per dwelling which is build into the price. That doesn't include value / cost for services such as transport ie roads rail buses which is huge. When you buy a house these costs are basically included in the price of the house in most established areas the services are there but large new developments and places where there are no services you pay up front . I would value the services provided to a house next to a main train station / transport to be 50 to 100 k. So the last factor employment supports the house prices and IMO is the main factor that will drive prices in oz.
The first one the cost of the house. This can vary considerably, in a boom brickies get upto $2/ brick in a low period they are down to 0.50c - $1, same goes for granos, plasterers, painters, roof carpenters, cabinet makers.
Also the price of bricks, timber etc drops. These factors bring down the cost of a house considerably.
The second one the cost of services, does add to the cost of a block but nowhere near as much as location. The cheapest land is still furthest away from the city, but the cost of providing services there are the highest.
Employment, is the key factor in the price of houses, nobody can support the average $400,000 mortgage when unemployed. The greater the recession the more the unemployment, which inturn causes more foreclosures. Less people can get loans so prices have to fall as banks try to minimise losses.
If the mines go "bust", the flow on will affect the prices in the capital cities, as the support services and flow on effect to general employment would be considerable. IMO
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