Over the last 40-50 years have seen an ever increasing level of debt accumulated by the Australian population, with allot of that going to pay larger and larger amounts for used properties (unproductive). This is why our debt to GDP ratio is at an all time high.
Firstly, the debt to GDP has not been growing constantly over 50 years - it's gone up, it's gone down - currently it is high yes, but as discussed yesterday not unsustainably so if you consider the factors that have driven it over the past 10-15 years. The current ratio of household debt to GDP is roughly 100% (and falling by the way) - at the macro level, that's equivalent say to an individual having a $50k mortgage if they earn $50k pa - that's hardly such a huge problem to pay off if they choose to is it?
As for money spent on housing being unproductive, that is an easily challenged assertion. How can you say money going into housing is unproductive? Let's say I borrow $300k, add a $50k deposit I saved and buy a $350k house. I give that money to someone. Either a developer who has just built a house (and therefore all that money was in effect used to buy materials, pay tradies, government taxes/fees for local infrastructure - sewerage, power, roads etc etc). Or an existing holder of established property - who then does what with the money? Maybe they build a new house (so money goes back into building industry) - or another established house? Or they save it? Or they spend it on other stuff? Maybe the invest the money in the share market or start a new business with it? Maybe they just spent a motza renovating (and thus improving the housing stock and employing tradies/ builders/ architects etc). The point is, the money has to end up SOMEWHERE, where it will be "productive" in some way or another.
So IMO it is wrong to say that just because money made available through finance is spent on housing (regardless of price level) is an "unproductive" use of that money.
The question I was asking that no-one here has given an answer two is in the future where are the buyers coming from?? Who can, or would want to take on the debt burden to keep prices going up??
That's easy - The buyers come from new entrants (population growth and migration) - in a growing country like Australia we have probably a century of sustainable population growth yet ahead of us (maybe debatable if you are a greenie but this is what will happen and the government plans for it). As wages/incomes grow through inflation and due to economic growth/ productivity improvement etc, disposable income is higher, and this feeds into housing price growth. Remember that FHBs only represent between 15 and 25% if home purchasers at any time - the rest of existing owners upsizing, downsizing etc etc.
Because land is a "non renewable commodity", existing housing stock will always become more and more "exclusive" as time goes on and the population grows, eg, there will only ever be a certain number of places by Bondi Beach available, which over time are in the hands of a smaller and smaller proportion of the total population. That factor is what drives prices of existing stock at a rate greater than wage growth and inflation - another way to think of it is an area starts as a FHB area, but 30 years later only 20% of owners are FHB, and 30 years later again everyone there is on their 2nd/3rd residences etc (as that area is now too expensive for FHBs).
As for affordability for new entrants, ultimately affordable new housing has to be created over time to meet that demand - over time that new cheaper housing is what will cause MEDIAN prices to only grow by the rate of inflation plus a small amount.
See how it works??
Cheers,
Beej