http://www.environment.gov.au/soe/2006/publications/commentaries/coasts/pubs/coasts.pdf

The anticipated inundation by the rising sea level in the next couple of hundred years will be factored in by any planner and hence priced in by most developers and buyers. Although the world will not be submerged in its entirety, that’s not even remotely possible, the scale of coastal inundations will have a monumental impact on the economic value of the affected lands.

Apart from beach front residential properties, all coastal infrastructures will be affected. In Botany Bay alone, the Mac-airport, the container terminals, the refineries, and General Holmes Drive etc. may have to be relocated.

Although I have been talking about 7 to 7.5m sea level rises, I now remember the evidence of 9m (by memory only, to be confirmed) sea level along the Australian east coast, presented by Professor Bruce Thom in his early research. I’ve been looking frantically for that piece of evidence when I saw Professor Thom’s name is displaced prominently on the Media Statement of the “Australia State of the Environment 2001 report”. He actually chaired the Australian State of the Environment Committee at that time. My friends, all I can tell you is, the Australian coastal environment has been in good hands, at least until 2001. I’m going to look for what Professor Thom had to say about the Australian coastal land.

Those mining towns have real supply and demand problems but the money they can all access is the big price driver because they are all earning good wages and the banks like a good earner, there is so much leverage to apply. So it comes back to availability of credit.

Supply and demand works even more powerfully in a city like Paris, yet without the same type of bubble as has/is occurring in Australia.

Supply and demand is a complex sets of forces and cannot be classified as a natural law, therefore it is inevitable.
I shall take a quote from Samuelson as he said it more clarity an authority–”Supply and demand are not the ultimate explanations of price. They are merely catch all categories for analyzing and describing the multitude of forces, causes and factors impinging on price. Once we understand that important forces lie behind supply and demand we can recognize the confusions of neophytes who utter,”You can’t repeal the law of supply and demand”. It would be better not to have learnt any economics than be left with this opinion.” Economics – An Introductory Analysis, 1948

Take note housing spruikers.

It is not really a chicken and egg situation is it? We have had the property standard instead of the Gold standard and it failed because supply and demand became a leverage tool rather than productivity or savings.

Just look at the towns which have had a population spurt because of the mining boom in Australia. Some of these towns are experiencing extreme price rises as high earning mining industry people need places to live that are reasonably close to where they work. A clear bubble and very cleary supply/demand driven. IT DOES NOT MEAN THAT LEVERAGE IS NOT PART OF THE MECHANISM, SURE IT IS BUT IT DOES NOT DRIVE IT. Supply and demand does, this is not neo-classical or static analysis, supply and demand is very dynamic, it is not based on supply demand curve shifts you learn in 1st year economics. It is simply a matter of lot’s of people with money needing a place to living where there are limited places to live. Once the mining boom is over and these people no longer work in that particular mine, those prices will go back to their previous values when there was no earning opportunities in the geographical vicinity.

I really think this is what is happening in Australia’s major cities, there is a limit as to how far you can live from your place of employment. The housing market is undeniably supply and demand driven, and yes leverage is part of this mechanism, a price catalyst. A symptom not a cause.

I agree that the median price is the best statistic in the housing market, especially in measuring some long term trend. However my point was that it is a very poor comparative measure between US and Australia as it hides the real story which is in the details and composition of the market. This is a pure statistic theory perspective, it is a good measure for some things but tells you nothing about the distribution and composition of the numbers.

I would argue that in Australia houses which are owned outright are more expensive. Again this is a composition detail which maybe unique to Australia. Reason for this is that new homes are built on the fringes of population centres, the real value in Australian housing is not the quality of the home but the land value, which rises very dramatically near the coast and close to commercial centers. These also happen to be the first populated areas and tend to have the oldest housing, which happens to be the most expensive.

Demographics as related to Australia is that places which are geographically viable to live are becoming overcrowded, and this is what keeps upwards pressure on prices. Sure the mechanism of price setting is effected by a lot of leverage, and it may reverse dramatically at some point. However demographics are acting to sustain upward pressure on house prices in a country where geographicaly viable living areas are limited and where population growth is strong. These are details you miss if you just look at simple ratios at the highest level of detail.

I guess the point is that I agree with the notion that leverage is responsible for a lot of perceived value in housing. However it is not the only story and is not necessarily self fulfilling.There are a lot of reasons why people choose to buy property at a given price other than the naive idea that prices can only go up. Even a rational person has to live somewhere close to work, and as long as that job is paying him enough to pay for rent, and as long as there are more and more people in the same situation there is competition for living space close to work and therefore pressure on rents and therefore upward pressure on prices as the rent/mortgage repayments converge. Sure, if unemployment and wages fall dramatically this story would change, but if you look very closely at the details for many, many reasons this is not likely to happen in this country.

(1) Pridmore S. Download of Psychiatry, Chapter 25. Last modified: September, 2009
CHAPTER 25
FORENSIC PSYCHIATRY

“In 1983 human body parts were found in a sewage processing plant in Hobart, Tasmania, Australia. Subsequently, Dr Rory Jack Thompson, an American-born research oceanographer, aged 41 years, employed by the Commonwealth Scientific
and Industrial Research Organization (CSIRO) was charged with the murder of his
estranged American-born wife, Maureen.

Dr Thompson had come to Australia in 1974 at the age of 32 years, and pursued a distinguished research career.”

“Dr Thompson pleaded not guilty to murder, saying that he had been mentally ill, he
had not been aware that his actions were wrong and that he was acting under an
irresistible impulse. He was found NGI and committed to a prison hospital under a
mental health act.”

“He was found not guilty, thus he was not in need of punishment. He was found insane
which indicated he was in need of treatment.

Dr Thompson’s release from custody, therefore, would depend not on the expiration
of a finite sentence, but on a Mental Health Review Tribunal forming the opinion that he was no longer insane and no longer a danger to the public, followed by the acceptance of this opinion by the Tasmanian Government of the day.

In 1990, after 7 years of incarceration Dr Thompson applied for release to the
Tribunal. Release was recommended. The Government of the day refused. In 1992,
Dr Thompson made another application for release. Release was again recommended
and again denied by the Government of the day. He made further appeals for release in 1993 and 1994 but these were denied.

In 1999 (now aged 57 years) Dr Thompson escaped from captivity but was recaptured
within hours. Later that year he hung himself in prison.”

(2) Rory Jack Thompson changed his name to Jack Newman by deed poll. “Brilliant but insane former CSIRO scientist (Australia), he was serving an indefinite sentence at Tasmania’s infamous Risdon prison hospital after being found not guilty by reason of insanity of killing his wife, then disposing of parts of her body down a toilet, and storing other parts in a freezer. On realising he would never be released he recently hung himself.” (famousnamechanges.net).

His former country, ie the USA and presumably his parents invested their future into his education of becoming a brilliant oceanographer. He got married and his wife borne him two children whom he had great hopes, just like his former society and his parents had great hopes in him. He migrated to Australia with his family at the prime of his life and he dedicated himself to keep on tread water on 30-foot waves collecting oceanographic data. Unlike fishermen trawling catches, Dr Thompson and his colleagues could not eat their data. They must bring their data back to CSIRO office at Cronulla, process them and compile them into reports for the benefit of the whole human race. All these hard works for the same amount of dollars as those branch managers supervising pretty girls in air-conditioned offices where they can enjoy a cup of coffee anytime.

Think of your children as piggy banks containing all your hard earn savings, same way as your parents invested in you. What’s left in you if they walk away from you in pursue of their own dreams?

Think of the hours you put in your course as an oceanology student, a petroleum engineer, an electrical engineer or even a geologist, and compare it with the number of hours put in by your friends who graduated with an economic degree, a commerce degree or an accounting degree. In Dr Thompson’s days, I bet he was putting in twice or even three times as much as the students in the economic, commerce or accounting faculties.

What was facing Dr Thompson in Australia? It would have been similar to that facing a Czeck mining engineer drilling at the back of White Cliffs. When one was biting dust in a no man’s land, the other would be treading mountainous waves in no-man’s water.

His high school friends who graduated from the economic, commerce or accounting faculties would have been laughing at his job as a oceanographer offshore Australia. They would have deserted him and too busy trying to find new friendships in the business, legal and political communities. Some of them could have become bank managers.

Dr Thompson was alone in the southern ocean, obsessed with his only investment in the form his children’s education. This obsession could have twisted his mind, or perhaps he was just too willing to conform, who knows?

His adopted society destroyed almost the entire investment by his former society instead of making the full use of it. What’s left in the Australian Journal of Marine and Freshwater Research epitomises what Dr Thompson could have achieve if the tragedy did not strike.

“The regression of water level on wave variance was found to be 2.88 cm m-2, in satisfactory agreement with the theoretical value of 3/4H, where H is the average depth of the Harbour entrance. “