Jan 6th 2012, 16:16 by Buttonwood
THERE has been a lot of attention paid to the effect of greying populations on economic growth (and of course on pension entitlements). But what about the housing market? We tend to buy our first house in our late 20s or early 30s, buy bigger houses as we have children, downsize as we retire and and sometimes sell all our property in our late 70s and early 80s as we move into nursing homes.
So it makes a certain sense that demographics and house prices should be related. An analysis by Ajay Kapur of Deutsche Bank shows this relationship is pretty robust. He finds a positive relationship between changes in the working age population ratio (15-64 year olds relative to the rest of the population) and residential property prices, real prices almost always rise when the working age ratio is improving. In contrast, real property prices fell in one in three years when the working age proportion was falling. This ratio is declining in many countries; indeed in some the absolute number of workers is set to fall.
To make things worse, consumers are already indebted, making them more reluctant to borrow money and buy houses. Kapur found that when the working age proportion was falling and the loan/GDP ratio was high, prices almost always fell. Furthermore, many housing markets are overvalued, relative to both incomes and rents.
Kapur combines all this in a league table to see where most countries rank. The US looks best, given that house prices have already fallen and its population is relatively young. Japan is losing workers but has already seen a huge fall in prices. The worst scores are in France, Belgium, Sweden and Denmark, which rank badly on every count. Britain's sole saving grace is that its absolute number of workers is still rising (time for the Daily Mail to sing the praises of immigration).
In this blog, our Buttonwood columnist grapples with the ever-changing financial markets and the motley crew who earn their living by attempting to master them. The blog is named after the 1792 agreement that regulated the informal brokerage conducted under a buttonwood tree on Wall Street.
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"...when the working age proportion was falling and the loan/GDP ratio was high, prices almost always fell."
Bank printing of debt worked synergistically with demographics and zoning to create a situation. Homes are unaffordable for the young, and so many mortgages are defaulting that public sectors are trimming other programs so they can bail out the banks. Decades of bank printed inflation discouraged citizens from buying productive capital goods with their savings, instead chasing Minsky as inflation hedges.
The free market produced western prosperity, and now inept bank central planning of the economy via printing is destroying it. The global housing Minsky that banks printed is just one example of capital misallocation. It would take about 30% of European GDP just to bail out European banks, which gives some idea of just how much capital has been wasted by bank central planning of prices.
How does Australia rank in this research table?
Yet another article that assumes high property prices are a good thing. When are you going to learn that young families crammed into small properties is bad for health, sleep, ability to work effectively, children's education and the economy as a whole? There is no housing market- what natural signals there may be are swamped by the unnatural signals generated by bad government policies from immigration to planning laws to subsidies to interest rate tinkering. These are the reason that UK property prices tripled in 10 years. The underlying factor is the engineered scarcity of land. Address that issue and you will bring most people under the age of 40 in from the cold.
Buttonwood,
The Daily Mail singing the praises of immigration will happen the day after hell freezes over.
The US can always let in anyone who is willing to buy a house.
Bamps,
Are you really so insecure that you have to "recommend" your own comments over and over and over again ??
Of course. How else could I get hundreds of recommendations on some comments ? It's very tiring.
are you really so insecure that you feel the need to invent conspiracies explaining why those who think differently to you might be more popular?
You are aware, I trust, that you can only recommend your own coments once. So bampbs is, at most, one recommendation in his total count . . . if he bothers to recommend himself at all. (All his meeping about exhaustion notwithstanding.)
The US looks best, given that house prices have already fallen and its population is relatively young.
Please tell Mr. Kapur to put away the pom-poms.
And yes, he does look silly in that cheerleading outfit.
Only suckers pay their mortgage.
Foreclosure free ride: 3 years, no payments
By Les Christie @CNNMoney December 28, 2011: 10:04 AM
http://money.cnn.com/2011/12/28/real_estate/foreclosure/index.htm
Excerpts:
NEW YORK (CNNMoney) -- Delinquent borrowers facing foreclosure are learning that they can stay in their homes for years, as long as
they're willing to put up a fight.
Nationwide, the average time it takes to process a foreclosure --
from the first missed payment to the final foreclosure auction --
has climbed to 674 days from 253 days just four years ago,
according to LPS Applied Analytics.
It takes much longer than that in Florida, where the process
averages 1,027 days, nearly 3 years. In D.C., foreclosure averages
1,053 days and delinquent borrowers in New York often stay in their homes for an average of 906 days.
Nearly 40% of homeowners in default have not made a payment in at least two years, according to LPS.
A Staten Island, N.Y. man who owed $300,000 on his mortgage and hadn't made a payment in two years, said his attorney used the robo-signing issue to fight his foreclosure.
Regards
Sadly no link, it's a privately-circulated research note
Why is a long term decline in housing prices an intrinsically bad thing?
If housing prices are ever allowed to fall to realistic levels, wouldn't that stimulate growth in other areas? And/or that people would spend the same amount of money for a nicer house?
Is there a link to this league table?