[OPE-L] Longterm effect of the property boom

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Sun Jan 28 2007 - 11:53:33 EST

One thing I've wondered about is this. If real wages remain relatively
stagnant while property prices strongly increase, you'd think the long-term
aggregate effect has to be a shift from freehold to mortgages, and that more
people will have to rent - even supposing there is more upward mobility to
higher income jobs over time. This trend does seem to be the case now,
especially in New Zealand but also, less strongly, in Australia, even
although many people could capitalise on higher property values and, of
course, property can be inherited. New Zealand has one of the worst ratios
of disposable personal income levels to property values, so it illustrates
the case. Given that radical declines in property values are very rare, an
increase in renting would indeed appear to be the longterm result. The
corollary I suppose is an increasingly influential landlord class. This
view is different from leftists prophesying a catastrophic collapse
of the property boom, which I think is very unlikely, except in
specific conflict zones where living there becomes undesirable.
Population pressures and increasing emigration create a sustained
demand for housing which is unlikely to disappear, regardless of
land-use policies. Thus, the "property-owning democracy" could
be a more transient phenomenon than people think.

Home ownership slipping, says Census
New Zealand Herald, December 29, 2006
By Anne Gibson

Increasing numbers of New Zealanders are renting their homes, rather
than buying them.

This year's Census shows the number of dwellings owned by their
occupants has fallen by 116,808 in the past 10 years, from 860,760 to

The number of households paying rent rose almost 100,000 in the same
time, from 290,124 to 388,272.

Ten years ago, about 80 per cent of dwellings were owner-occupied. Now
the figure is about 60 per cent. (...)

Ireland has one of the world's highest rates of home ownerships at 77
per cent. Britain follows at 70 per cent and the United States at 68.5
per cent.

New Zealand and Canada have roughly the same rates, followed by France
at 56 per cent, the Netherlands 55 per cent, Denmark 53 per cent,
Sweden 46 per cent and Germany 45 per cent. (...)

In Australia  there was a decrease in the proportion of households that
owned their dwelling outright, from 42% in 1994-95 to 35% in 2003-04. There
were increases in the proportion of households that had a mortgage on their
homes (from 30% to 35%) and in the proportion of households that were
renting privately (from 18% to 21%).

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