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Thread: Salaries and Pensions in the Eurozone

  1. #26
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    Quote Originally Posted by Maciamo View Post
    But in the end what drives salaries up is the price of real estate.
    I'm sorry Maciamo but you have it backwards, unless one is a real estate agent.
    Notice that in places where real estate prices are going sharply up there is ongoing economic boom. It means that local people are making more money and have a surplus to buy houses or apartments, opposite to renting. Real estate is considered buy most people, not only a product but also an investment. Buying a car is not an investment but buying a house is. In good economies people make more money and they invest savings in real estate. Then you have your own house to live in or rent it to make an income on your investment. This sharp demand pushes the prices up. That actually encourages more people to invest, even from other cites or countries to benefit too. Often it leads to a bubble like in States or in Spain recently. But as long as there isn't overproduction or too much speculation, the real estate prices keep rising during economic boom. It all points to bigger incomes and demands pushing real estate prices up, and not vice versa.
    We also know what happens if demand goes away, recession,people not buying and prices of houses go down. Supply and demand, at least in free market economies.
    I've seen couple of these cycles first hand in Calgary, my city in Canada.

    Beside this, I mostly agree on your points.

  2. #27
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    Quote Originally Posted by LeBrok View Post
    I'm sorry Maciamo but you have it backwards, unless one is a real estate agent.
    Notice that in places where real estate prices are going sharply up there is ongoing economic boom. It means that local people are making more money and have a surplus to buy houses or apartments, opposite to renting.
    Look at big, fast-growing metropolises like Moscow or Shanghai. The average population isn't rich, but real estate prices have skyrocketed due to the inflow of people from the countryside. Lack of supply (in this case housing) drives prices up. In real estate, lack of space has the same effect. That's why big cities are always more expensive than small cities, which are in turn more expensive than the countryside (inside the same economy, and comparing neighbourhoods of similar socio-economic standing).

    Sometimes real estate prices soar for other reasons, like speculation, as seen recently in the USA, Britain, Ireland and Spain. But that's also due to the lack of supply compared to the demand. When everybody wants to buy (even if they need to borrow heavily, not just because they have money), the natural outcome is a bubble of prices. The state of the economy and the wealth of citizens has little to do with it. Salaries just need to adjust over time so that people can still live in a city with inflated real estate prices. The effect might also be that poorer people move out and richer people move in the city. If not poorer people get poorer and end up in slums. This is what has happened throughout history in big cities in developing countries (in Europe as late as the industrial 19th century and early 20th century).
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  3. #28
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    I agree with your reasons influencing real estate prices.
    There is only one, though major, argument that divides our opinion. I still claim that the main reason that effects price movement is economy and wealth of citizens.

    - the successful cities have economies better that surrounding villages.
    - all rise in Real Estate prices start with improving economy of a country or a region.
    - you don't find many ,if any, investor and speculators in economically depressed regions or cities.
    - demand and speculation is always higher in economically vibrant cities or regions
    - if economy is good people make more money therefore they can afford buying house or apartment, investing versus renting.
    - look that in improving economies people spend more money on better homes, higher standards, bigger apartments, than they used to before economy was good. This also influences higher prices, for better standard of living. New, though more expensive homes, have better insulation - energy efficiency, more power outlets, more bathrooms, nicer decor, bigger space, more high tech appliances. Ordinary citizens these days in good economies live in standard of living of rich people 50 years ago. This influence the prices as well.

    I agree that speculation, especially in today's borderless market, lifts the real estate prices higher than if they only have been influenced by local economy.

    Obviously there are contrary examples in areas where people love to retire. Usually there is not much production going on there, but the money rich people bring in move the housing prices up in these ares.

    In many cases it's not too obvious or transparent, but the main thing moving real estate prices is the local economy.
    Last edited by LeBrok; 26-01-11 at 18:07.

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    Just to give you some feedback:

    The ticket price for using the bus in Athens (at the rest of Greece it's more expensive) has gone from 1euro to 1.5. The price of 1lt of milk is around 2 euros (it depens on the supermarket or minimarket that sells it). Gasoline price is 1.7euros/litre and last year it was 1euro/litre. Bread is now sold 1.5-2.5 euros per 0.5kilo (depending on the bread) while a year ago it was 1-1.5 euros. And the list goes on and on.

    So in Greece we have a reduction in salaries around 20-30% and a 40-60% increase in everyday goods the last year... So how Greeks are supposed to live? Go figure...

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    It really sucks Marianne, I feel your pain.

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    I hope we will get out of this situation soon, but I see the government making mistakes on how they are handling the situation.

    The IMF is asking us to increase the annual income so what our government does is increasing VAT. The problem is that since they have already decreased the salaries, people are not buying as much and by increasing VAT people buy even less. This leads to decreased income for the state. They expected to get around 700mil euros extra by increasing VAT but what they got was barely 500. The only reason we managed to reach the goal IMF set for us this year was demanding from businesses to pay more taxes for the last 5 years, and that barely covered the difference.

    Now they found out that the National Bus and Metro company has a huge dept and instead of trying to figure out how all that money disappeared illegally, they decided to increase the ticket from 1euro to 1.5. At the moment it is more expensive to take the bus than using your car to cover the same distance within the city. So much for green growth and clean environment...

    They keep increasing the taxes in order to get fast the money they need to satisfy the IMF and this is fine for a few months as long as they have a plan for the future to promote growth and increase income but they don't.

    People are buying less and less and this leads to small businesses closing and people becoming unemployed which makes them buy even less. They should give businesses incentives to not fire people, they should reduce the taxes they pay and encourage people to start new companies but I don't see any of these happening.

    I really hope they have a plan because I don't see Greeks being patient for long...

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