Two more Youtube Videos

Flattr this!

Thanks again to Benny Sutton for producing a brief interview debunking the “population growth causes house price rises” argument:

I decided to add my recent Powerpoint Presentation to the mix:

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
Bookmark the permalink.

12 Responses to Two more Youtube Videos

  1. Skichaser says:

    Well done Steve, spot on. Did Tony from the ‘property lobby’ present empirical academic data like yourself at the recent meeting ? From the only bits I saw on Lateline, he seemed to walk up and down the stage, in a type of Footy Coach presentation, trying to win support. Please correct me if I got this wrong. I would also like to say, I completed a BSc in molecular biology over 10 years ago as 30 year old. Watching your presentations, and if I had more time and money (tied up in the home loan, ha ha !), make me want to go back to University and do an Ecomomics Degree !

  2. alainton says:

    Straw man argument steve

    Australia has one of the highest levels of household growth in the world, much higher than population growth

    ‘The number of households in Australia is projected to increase from 6.9 million in 1996 to between 9.4 and 10.0 million in 2021, a rise of between 38% and 46%. Household growth is projected to be faster than population growth (24%) over the projection period. The projected average annual household growth rate for Australia in Series B (1.4%) is higher than the projected rates for the United Kingdom (0.6%), the United States of America (1.1%) and New Zealand (1.2%) but lower than the rate for Canada (1.6%).’

    All your graph of population shows is a temporary dip of birth rates 2004-2007 – see here.

    Rise or falls in birth rates have no effect on household growth for 18+ years.

    Your argument about household size is really an argument about household growth – a hidden assumption. Falling household size is often (but not always) an effect of household growth.

    No one with any knowledge of real estate economical would argue that population causes house price rises, rather that household growth does – if and only if ‘concealed households’ have the ability to create a new house – such as through a mortgage.

    This is not an argument that credit growth doesn’t matter. Easy credit can induce household formation, and can cause prices to rise without reference to underlying demographic demand if a bubble phase kicks off. But housing credit always has an opportunity cost. Unless supply is tight in the housing sector why shouldn’t people borrow to fund investments in other sectors of the economy causing asset price bubbles there?

  3. Steve Keen says:

    No, he just walked up and down making “house prices always rise” statements. It was an interesting window into what an “investment seminar” must be like.

  4. myopia says:

    When is your book out Steve?

  5. Steve Keen says:

    In September, Myopia–the 22nd is the launch date from memory (in the UK).

  6. kys says:


    Obviously most housing experts in this blog aren’t available to answer you, so please put up with a semiliterate like me who may bring about more troubles than answers.

    1. projections are not predictions or forecasts, but are simply illustrations of the growth and change which would occur if certain assumptions about future trends prevail over the projection period. ( from ABS explanatory notes )

    2. While the assumptions for the projections are formulated on the basis of an assessment of past trends in living arrangements, there is no certainty that the assumptions will or will not be realised. In addition, it should be noted that no assessment has been made of changes in social and economic conditions which may influence future living arrangements. ( ABS explanatory notes )

    3. Your link shows “household & family projections 1996 – 2021” is outdated. Please try something new:

    4. 50% of the Increased Household formation has been absorbed by renting, the other half has gone to ownership. ( some arithmetic from the link above )

    5. Now the problem is about 1.5 million new households were formed during 1995-2008, i.e. 115 k per year. Do we build enough? Please refer to the following link for an answer.

    6. If as you stated, “the projected average annual household growth rate for Australia in Series B (1.4%) is higher than the projected rates for the United Kingdom (0.6%)….”, then why do Australia and UK have had the same percentage growth (300%) in house prices since 1995. Does this mean other than household formation, there must be something else to consider?

    7. What Professor Keen said is people with mortgages, not growing population influence house prices. That’s right! Think again, please.

  7. alainton says:



    3. I was aware the household data I used was out of date as my post was hurriedly prepared before breakfast. Thanks for the update.

    1-2. One of the problems of course with household data is that it is only available every few years and so you get the problematic of using a forecast as a prediction as current. But that doesn’t stop almost all western nations setting the targets for expansion of the housing stock on the basis of household projections as they are much more relevant, despite this proviso, than population data as a basis for estimating housing demand.

    4. Not relevant, changes in households = demand for housing of all tenures. There is build to let and buy to let. Households move into new houses and some of the old units are bought some by buy to let landlords.

    5. Housing requirement for a year =household formation in that year+realistic contribution towards clearance of backlogs from previous years+induced household formation (that is concealed households who form households because of increased supply driving down prices, enabling them to afford to form a household they couldn’t before)+frictional contribution (to account for houses standing empty because of death, people in nursing homes etc) +replacement of worn out/demolished stock. You need to check out reports from housing economists such as Kate Barker

    I will try to see if there is any aus data on all of this. But a number of state government reports I have read on housing supply suggest that starts are only just keeping up with requirements and they haven’t dealt adequately with the backlog or affordability.

    The straight comparison is misleading especially when house prices are unaffordable to most households.

    With completion levels in Aus close to 1950s levels its seems instinctive to me that supply issues pay a part. The way the HIA quote irrelevant data I think has contributed to the confusion.

    One of the reasons people have been taking out more credit than they can afford is because houses are expensive because not enough are built.

    6. Yes two other factors, housing starts and availability of credit. All I am arguing is that any explanation that only accounts for two or three factors and not the third is incomplete.

    Imagine two countries with different household formation rates but the same rate of starts and same household income. They would have very close to the same rate of house prices rise because

    a) new houses typically only add 2-3% of the stock/annum, most house sales are of existing houses

    b) So with the overall stock near enough the same the rising households would not be able to afford the new houses and wouldnt enter the housing market – there would be what is called enforced sharing.

    So the data you quote is exactly what would be expected. It takes a sustained and large increase in housing over many years to push affordability up.

    There is nothing exotic about this argument it is the standard economic geography/land economics approach (which by the way doesn’t have a lot to do with neoclassical orthodoxy – it owes more to Henry Hoyt, Henry George and Alonso/Ricardo/Sraffa). None of Steve’s arguments undermine this approach, they add to it through a more robust concept of credit for housing.

    7. I agree but the first few slides don’t demonstrate that because correlation of population with house prices is a straw man – its household change that matters. I am not arguing with the thesis just the method of proof. The HIAs flawed argument doesn’t require a flawed disproof. The HIA might also be only part right but for the wrong reasons.

  8. Skichaser says:

    Steve, my apologies for not expressing the following in the academic economic format like yourself and posts from other contributors. But just to give some perspective to the state of the economy now, from an ‘on the ground’ personal perspective, even though I know there is a dearth of data supporting what I am about to say.

    Although I have a professional week type job, in the lame attempt to earn some more money, I took on a Sunday second job 12 months ago. This happened to be the same type of casual job I had when I was at university in the late 90’s with a well known national electrical/home entertainment chain here in Adelaide (a bunch of Good Guys they are to). Since January of this year, it has been dire, it is clear people have pulled in their spending. So much so, I was relieved of my token 6 hours, as I was told so to support their permanent staff ( I have also been told staff leaving are not being replaced). The atmosphere is exactly the same, when in the early 90’s as a young inexperienced 20 year old, I sold new Toyotas, and without much trouble selling 12-15 cars per month. Then ‘the recession we had to have’ came in, and within 2 months I was struggling to do 5-6, and lost my job, and went backpacking around Europe. The point I am trying to make is, with all this massive record breaking debt many are carrying, I can see how we are really set-up for a potential melt down, and all thanks to the over heated property market here in AUS that we have created.

  9. Steve Keen says:

    Indeed Skichaser–that’s the sort of change I think we’re seeing right now, courtesy of credit slowing and the Credit Accelerator starting to turn negative. That’s what caused The Recession We Had to Have, and it will cause the next one too–with only China to save us, and that means (it seems) relying one someone else’s bubble to rescue us when ours bursts.

  10. Amotzza says:

    Steve, We had too much debt with 3 properties two of which were in good Melbourne Suburbs such as Toorak and South Yarra. We now have one property on the Mornington Peninsua which we are endeavouring to sell.
    However the real tell in what the australian Public are doing is in the business we operate on the third property – horse breeding. The costs continue to go up but the prices have collapsed – when artificial support is taken out of the market they are down 70%. We have reduced staffing from 5 to 1 and that will go to zero asap. amongst my group I am an considered an absolute pessimist. The only positive was when I was 1 of 4 VIP’s from Australia at a conference in Mid China in June where John Howard was guest speaker and the positive vibes all around Shanghai and businesses I visited nearby. However apart from the influence of China whether I look at the horse business, your presentations, those of Harry Dent and Robert Prechter I come to the same conclusion – depression coming – am I a pessimist?

  11. Steve Keen says:

    Hi Amotzza (like the byline BTW), I think you’re in the realist camp like me, but that does include the chance for occasional revivals, as this post points out–something I didn’t appreciate sufficiently before extending my analysis to include the Credit Accelerator.

    Thanks for these informative anecdotes too.

  12. Mich says:

    The Philadelphia Story
    1940, Katherine Hepburn, Cary Grant.

    1993, Hanks, Washington.

Leave a Reply