OZ BOOM is over?...house prices falling & rates might drop
Jul 11th 2010 | 5:55 pm
#526
Account Open
Joined: Jan 2005
Posts: 4,298
From: Brisbane
Re: OZ BOOM is over?...house prices falling & rates might drop
The flaw in the article (and pomtastic's response) is the underlying assumption that people are all renting at fair value.
Pomtastic says :
"I agree with the article because rents are driven by what people can actually afford to pay versus house prices are determined by credit."
This is incorrect. Rental prices are not driven by what people can afford to pay. They are driven by what people are willing to pay, whether they can afford it or not. This is supply and demand in action, nothing less. Rental pricing comes down to supply and demand, it is no different from any other form of pricing.
The Economist article assumes that any deviation from the long term average, must mean that property is either "under" or "over" valued. There is the implicit assumption that rental prices are always at fair value......
On top of that, The Economist assumes that the long term average ratio, is a good representation of fair value in the first place. Historic data doesn't take into account changes that have happened in the real world.
Aus prices 61% too high, Japanese prices 34% too low... ?!! Complete garbage based on flawed assumptions.
Pomtastic says :
"I agree with the article because rents are driven by what people can actually afford to pay versus house prices are determined by credit."
This is incorrect. Rental prices are not driven by what people can afford to pay. They are driven by what people are willing to pay, whether they can afford it or not. This is supply and demand in action, nothing less. Rental pricing comes down to supply and demand, it is no different from any other form of pricing.
The Economist article assumes that any deviation from the long term average, must mean that property is either "under" or "over" valued. There is the implicit assumption that rental prices are always at fair value......
On top of that, The Economist assumes that the long term average ratio, is a good representation of fair value in the first place. Historic data doesn't take into account changes that have happened in the real world.
Aus prices 61% too high, Japanese prices 34% too low... ?!! Complete garbage based on flawed assumptions.
Jul 11th 2010 | 5:56 pm
#527
Mostly Harmless
Joined: Dec 2009
Posts: 15,111
From: Semi-rural wonderworld, Brisbane
Re: OZ BOOM is over?...house prices falling & rates might drop
Last edited by DeadVim; Jul 11th 2010 at 5:59 pm.
Jul 11th 2010 | 6:04 pm
#528
Account Open
Joined: Jan 2005
Posts: 4,298
From: Brisbane
Re: OZ BOOM is over?...house prices falling & rates might drop
That graph will tell you more about house prices that the Economist article.
Jul 11th 2010 | 10:18 pm
#529
Guest
Posts: n/a
Re: OZ BOOM is over?...house prices falling & rates might drop
I Love it 
Jul 12th 2010 | 4:19 pm
#530
Thread Starter
Pie Eater
Joined: Sep 2007
Posts: 770
From: South Australia
Re: OZ BOOM is over?...house prices falling & rates might drop
Jul 12th 2010 | 4:50 pm
#531
Mostly Harmless
Joined: Dec 2009
Posts: 15,111
From: Semi-rural wonderworld, Brisbane
