what's a housing bubble? and is it relevant to 05? (1 Viewer)

[unfold]

hey peeps,
um i was reading an essay by someone from BOS and it says:

In the current context, the RBA has recently increased interest rates by 0.5% to its current levels of 5.25% despite signs of a slowing domestic economy. This is mainly because of our housing bubble still being relatively strong, even though it has shown signs of slowing down. If this housing bubble bursts abruptly, it could have detrimental effects on our strong economy, including the wealth effect whereby rapidly decreasing asset prices would cause consumer sentiment to decrease and thus consumption and output and ultimately economic growth to decrease. Increase interest rates would ensure that cost of borrowing is higher and thus discouraging further housing loans.

i have no idea about the housing bubble and how its relevant to the current context..i hope someone out there can help me! maybe the person who wrote it!! TEE HEE...

thanks in advance!!!

 

[pete_mate]

what he wrote looks to be wrong, i recently read gittens' article on the housing boom and the wealth effect is increased consumer spending from increased wealth from increased housing values

the essay is old, the housing bubble hasnt burst, but it has "petered" out, building approvals etc. have fallen

it is important to the course as it has implications for our external and internal stability, so pretty much the whole course

 

[Rafy]

Do a little bit of research on the RBA's quartely statement that was released today. It details the reasons for their monetary stance.

On the housing bubble, It has not burst but flattened out. The newest figures show that the gwoth in housing prices was either steady or still postive in all the states bar NSW (probally due to the recently abolished Vendor duty) So i do not anticipate we will se a massive downturn in housing prices. Its come to a smooth halt.