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Thanks. So... it all started in America eh? :lol::lol:

Yes, they're virtually all of local origin, see our "From the Subprime to the Terrigenous" - and although ours in Oz is actually bigger than all of 'em, most Australians believe we have avoided the crunch. This is because we are at least six quarters behind the US recession, as shown in that article. [The small last qtr 'r'(ecession) shown turned out not to be (quite) a large 'R'(ecession) in the first quarter of 2009.]

Anyway, here's a picture of Australia's land values to GDP since 1911. A reversion to the mean (1.1) would connote a 60% decline in land values across Australia. This would translate to an average fall in improved property prices of 50%. When you take into account the usual overshoot (beyond the mean), things are shaping up to be as bad as anywhere here.

SV_to_GDP.jpg

And here's a picture of our property values to be written off [above the bubble line].

Barometer.jpg

post-15400-1247217679_thumb.jpg

post-15400-1247217823_thumb.jpg

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And here's a picture of our property values to be written off [above the bubble line].

Whoops! That chart was unanotated. It should have been this one.

Barometer.jpg

Barometer.jpg

post-15400-1247218377_thumb.jpg

post-15400-1247218465_thumb.jpg

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UK house prices relative to GDP since 1955.

This doesn't necessarily mean house prices have only another 20% to fall in real terms. Real GDP is contracting (at up to 10% annualised if last quarter is anything to go by!), so real house prices will have to fall further to reach the same ratio. I am not sure what to make of the abnormally low dip in the mid 90s.

house_prices_relative_to_GDP.png

post-21200-1247224185_thumb.png

Edited by bearly legal
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UK house prices relative to GDP since 1955.

This doesn't necessarily mean house prices have only another 20% to fall in real terms. Real GDP is contracting (at up to 10% annualised if last quarter is anything to go by!), so real house prices will have to fall further to reach the same ratio. I am not sure what to make of the abnormally low dip in the mid 90s.

interesting

does anyone know how does that graph correlate with the earnings multiple one

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interesting

does anyone know how does that graph correlate with the earnings multiple one

I'm happy to give it a go, but I'm having trouble finding a good wage index to use. The ONS Average Earnings Index only goes back to 1990. Does anybody know one which goes back further?

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I found a version of the ONS Average Earnings Index which went back to 1970 here, and have used the Nationwide nominal house prices, the ONS GDP index YBEU, and the ONS RPI index CHAW to make these graphs.

Although they are quite similar, it looks to me like average earnings are a better indicator of where house prices will fall to than GDP. This makes sense since houses are mostly bought using wages. On this measure, the house price to earnings ratio is likely to fall by at least 50% from its 2007 peak. There has been a growing separation between real GDP and real earnings since the early 1980s. Basically, the share of national income given to labour has fallen, and the share retained by capital has risen. It may be that the labour share of income will need to rise for there to be a recovery, as at the moment workers are producing a lot of stuff which as a whole they cannot afford to buy themselves because their wages are too low, so capital (firms) are having trouble shifting stock. In recent years the problem of labour's declining share of income was solved by lending large amounts of money to the workforce so they could buy their own products on credit, but this is no longer an option.

houses_gdp_earnings.PNG

rpi_gdp_earnings.PNG

post-21200-1247756489_thumb.png

post-21200-1247756497_thumb.png

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I found a version of the ONS Average Earnings Index which went back to 1970 here, and have used the Nationwide nominal house prices, the ONS GDP index YBEU, and the ONS RPI index CHAW to make these graphs.

Although they are quite similar, it looks to me like average earnings are a better indicator of where house prices will fall to than GDP. This makes sense since houses are mostly bought using wages. On this measure, the house price to earnings ratio is likely to fall by at least 50% from its 2007 peak. There has been a growing separation between real GDP and real earnings since the early 1980s. Basically, the share of national income given to labour has fallen, and the share retained by capital has risen. It may be that the labour share of income will need to rise for there to be a recovery, as at the moment workers are producing a lot of stuff which as a whole they cannot afford to buy themselves because their wages are too low, so capital (firms) are having trouble shifting stock. In recent years the problem of labour's declining share of income was solved by lending large amounts of money to the workforce so they could buy their own products on credit, but this is no longer an option.

cheers

pretty correlated and no leading indicator for forecasting

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Do you have a link you could add? :)
I've hunted, and I haven't found that highly amusing animation. But here is a static overlay of the charts, effectively showing the same thing (you need to follow the link, as they are not simple images, but use interactive javascript):

http://byline.timetric.com/2009/05/13/slowly-downwards-the-bank-of-englands-projections-of-the-uk-economy/ ://http://byline.timetric.com/2009/05/...he-uk-economy/ ://http://byline.timetric.com/2009/05/...he-uk-economy/

This one?

AniFan.gif

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