tag:blogger.com,1999:blog-8133337349608142588.post2291530695676222918..comments2024-02-28T03:43:57.586-08:00Comments on FET (old posts): Improving the house price and income debateCameron Murrayhttp://www.blogger.com/profile/08737859133901303110noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-8133337349608142588.post-62540181578612323812011-09-03T04:53:58.794-07:002011-09-03T04:53:58.794-07:00RE: decent regular estimate of household incomes f...RE: decent regular estimate of household incomes for those who wish to use them for analysis. Maybe the RBA should try it sometime.<br /><br />perhaps they have and have been told to paint a less gloomy picture?obakesanhttps://www.blogger.com/profile/13743339737847465926noreply@blogger.comtag:blogger.com,1999:blog-8133337349608142588.post-2045122183953246832011-09-03T01:20:21.915-07:002011-09-03T01:20:21.915-07:00Cam
Repayments % wages (after tax) at present pri...Cam<br /><br />Repayments % wages (after tax) at present price<br /><br />Assuming 10% deposit<br /><br />300% (price GDP ratio) X .90 = 270% GDP<br /><br />7.5% mortgage with 1% ammortisation (25 year loan) = 8.5% repayment rate<br /><br />270% X 8.5% = 22.9% (GDP) repayments<br /><br />Wages minus income tax share GDP = 38%<br /><br />Repayments % wages minus income tax = 22.9%/38% = 60%Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8133337349608142588.post-84217463415040707332011-09-02T05:12:27.338-07:002011-09-02T05:12:27.338-07:00am I reading this wrongly or is this statement of ...am I reading this wrongly or is this statement of anon above indicating that things are about twice as bad as Cam's suggestion?obakesanhttps://www.blogger.com/profile/13743339737847465926noreply@blogger.comtag:blogger.com,1999:blog-8133337349608142588.post-84744454304803756242011-09-02T03:09:40.824-07:002011-09-02T03:09:40.824-07:00Cam
The house price/wage ratio debate has become ...Cam<br /><br />The house price/wage ratio debate has become a mass of labarynthine data massaged to overwhelm and obfuscate<br /><br />We only need to use 3 numbers<br /><br />Wage Tax Price<br /><br />Wages share of GDP = 48%<br />-Income tax Share of GDP = 10%<br />divided by Price = 300% GDP<br /><br />I get a ratio of 300/38 = 7.9X wages (after income tax) <br /> http://www.rba.gov.au/publications/smp/boxes/2011/feb/c.pdf<br /><br />http://www.rba.gov.au/statistics/tables/index.html<br /><br />Price = RBA B21 / RBA G10Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8133337349608142588.post-80309895634217595622011-09-02T02:02:24.528-07:002011-09-02T02:02:24.528-07:00Anon,
I agree the income measure and ratio is not...Anon,<br /><br />I agree the income measure and ratio is not a big deal in isolation (as I said). But the measure has been misused to generate the impression of stability and a lack of risk in Australian housing. Clearly, with price falls since peak in Brisbane and Perth already greater than 10%, and monthly falls in these markets still above 1%, house price stability is not widely the experience on the ground.<br /><br />If the ratio was so stable and a fundamental support for prices, why have price fallen at all?<br /><br />"With house prices flat (and even the most optimistic commentators are not expecting another boom), growth in household incomes will address the ratio (if it is elevated) over time"<br /><br />If these two variables (house prices and incomes) are completely independent, then yes. But I would argue they are not, and they are both driven strongly by credit growth. After all, buying an existing home is simply borrowing money to give to the previous owner. Which means that credit growth is basically like fiscal stimulus by the private sector to itself. <br /><br />If house prices could be flat and income growth could close the ratio, why are prices falling now? And what will stop this fall? Yes there is plenty of ammunition for rate cuts, but whether would be enough to stop house prices falling I don't know. <br /><br />I can't predict the future (although I often pen some words just in case I'm right), but it seems pretty clear that the downside risk in Aussie housing are far greater than any upside potential, and it would be foolish to leverage into this asset class at this point in time.Cameron Murrayhttps://www.blogger.com/profile/08737859133901303110noreply@blogger.comtag:blogger.com,1999:blog-8133337349608142588.post-13199862504140046202011-09-01T23:19:45.904-07:002011-09-01T23:19:45.904-07:00all assets will fall, plus goods and wages ?!
Isn...all assets will fall, plus goods and wages ?!<br /><br />Isn’t it a deflationary scenario? RBA should cut interest rate to ZERO!<br /><br />I hope it will never happen on us.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8133337349608142588.post-2161540120123871872011-09-01T22:29:03.752-07:002011-09-01T22:29:03.752-07:00I do not understand why everyone is making such a ...I do not understand why everyone is making such a big deal about the RBA "overstating" household incomes. The reason they use that measure in the context they do is because it's the only measure in which meaningful international comparisons can be made, given the standardisation of international economic accounting. <br /><br />Further, a 4x 5x or 6x ratio is largely insignificant, as long as the household sector can service that debt burden. What matters is the movement in that ratio, which has stabilised. <br /><br />With house prices flat (and even the most optimistic commentators are not expecting another boom), growth in household incomes will address the ratio (if it is elevated) over time.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8133337349608142588.post-77176404625448712652011-09-01T17:57:21.584-07:002011-09-01T17:57:21.584-07:00I want my salary via the RBA method please!I want my salary via the RBA method please!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8133337349608142588.post-55256886670738013492011-09-01T16:58:42.183-07:002011-09-01T16:58:42.183-07:00You means the Champs Elysees? Yes, Australia has ...You means the Champs Elysees? Yes, Australia has a lot of debt to unwind and all prices will fall - first assets (land and rents), then primary and secondary goods (including capital) and also wages.<br /><br />I have made similar international comparisons before, and mine was a run down house in Darra (Brisbane) for the price of a French chateau on 5Ha with a pool and guest house.Cameron Murrayhttps://www.blogger.com/profile/08737859133901303110noreply@blogger.comtag:blogger.com,1999:blog-8133337349608142588.post-84152254090575562152011-09-01T16:34:40.364-07:002011-09-01T16:34:40.364-07:00heard on the ABC this morning that retail rents in...heard on the ABC this morning that retail rents in sections of Syd and Melb are higher than the Chans de Lisse in Paris. Strange that the Dollar is worth less then the Euro and that the number paid of salary (not currency conversion) is about the same as in Australia.<br /><br />My wife's apartment in Finland, in a university town 5 min walk from the town center costs less to rent per month than a similar one in Armidale (a comparable city) does per week.<br /><br />So around 4.25 times over valued in Australiaobakesanhttps://www.blogger.com/profile/13743339737847465926noreply@blogger.com