The future of Australian property prices

[lusk]

$60,000
May be ok for an office worker, but he said he was a professial, to me a professial is a working in a profession, eg lawyer, dentist, civil engineer etc. I would be pretty upset if I went to uni to to become a professional and earned less than $100k,

What do you just get a degree and pull 100k straight up, he is only 25 so still green with only few years out of uni(possibly), 60K seems right. The calculations he has done are with his wage static but it will increase in years to come which he has not considered.

 

[stacks]

I use a base rate of 10% per annum....now it may not grow at 10% each and every year from day one....it may even remain stagnate for 3 years...then do a small spurt and suddenly grow 20% in one year....but after 10 years ...and in hindsight on your part it should eventually produce the results...of either a doubling or tripling in market value

then in around 5 years time....your income should have increased dramatically, the little property should have doubled in price.....

I have just found out a relative of mine...she is just 22...earns $400 k pa....

These..... three....statements.....I'm.....really....not....so.......sure.....about

 

[againsthegrain]

Wow she must of been on a starting wage 100k at local macdonalds back in yr12

 

[Tysonboss1]

What do you just get a degree and pull 100k straight up, he is only 25 so still green with only few years out of uni(possibly), 60K seems right. The calculations he has done are with his wage static but it will increase in years to come which he has not considered.

Gee, I am glad I didn't go to uni then,

 

[prawn_86]

I have just found out a relative of mine...she is just 22...earns $400 k pa....and blows it all on overseas hols etc....she is an accountant with a no 1 miner in OZ......
you have choices.....
...

I very much doubt this. If she is an accountant that means she would have had to do a adegree so lets work backwards from a best case scenario.

If she finished high school at 17, she could have completed a 3 year degree at 20. She then needs to get into a grad role (probable depending on grades) which pays about 60k pa. Then she needs to do CA or CFA, which takes another 2 years.

So you are saying that she got a 700% pay rise once she completed her CFA at the age of 22? I know partners at big 4 firms who are not on that much money.

I got a great job when i graduated from finance and now earn pretty decent coin (im 24). I'm earning more than anyone i know of my class and i can assure you its not 400k

 

[Tysonboss1]

I have just found out a relative of mine...she is just 22...earns $400 k pa....and blows it all on overseas hols etc...

Thats really good money for a young female,

Perhaps the money is not all she is blowing.

 

[Mr Z]

I see that the Cloud Cuckoo Airline is thriving, tis the only legal way you get this high.

 

[young-gun]

Thats really good money for a young female,

Perhaps the money is not all she is blowing.

haha

 

[medicowallet]

Kincella, I think 10% capital gain per year is to much to expect.

I think if you buy you property well, a 10% total return per year is a more realistic figure, made up of the following,

3% general inflation + 4.5% Cashflow ( after cost rent ) + 2.5% actual value growth

so 5.5% capital growth (this is probably reasonable for a growing market, but I wouldn't count on this at the moment)

4.5% cashflow (aftercost rent) = I assume this means after outgoings.

$350000 house, $370 per week rent = 5.5%. So you expect total outgoings to be $3500 per year....

NOT going to happen..... rates, insurance, RE agent fees, maintenance, depreciation.

I have put this up before, but people NEVER include the fact that there is significant upkeep... but in this example, you are ALREADY counting your capital growth in a different part of your calculation.

so please explain your claims...

 

[medicowallet]

$60,000
May be ok for an office worker, but he said he was a professial, to me a professial is a working in a profession, eg lawyer, dentist, civil engineer etc. I would be pretty upset if I went to uni to to become a professional and earned less than $100k,

Yes, the tide has turned. Mining boom, first home vendors boost etc.

But, in time, mining will return to normal, and, so will our outlooks.. booms never last forever, especially in a country suc as ours where we offer nothing else (partially because our government is incompetent)

So, eventually it will all tank, when? who knows... China will crumble in a heap at some stage, all superpowers do.

 

[Tysonboss1]

1, so 5.5% capital growth (this is probably reasonable for a growing market, but I wouldn't count on this at the moment)

2, 4.5% cashflow (aftercost rent) = I assume this means after outgoings. $350000 house, $370 per week rent = 5.5%. So you expect total outgoings to be $3500 per year.... NOT going to happen..... rates, insurance, RE agent fees, maintenance, depreciation.

3, I have put this up before, but people NEVER include the fact that there is significant upkeep... but in this example, you are ALREADY counting your capital growth in a different part of your calculation.

so please explain your claims...

1, Note, I said if bought well, Not " If bought any time at any price"

2, Note, I said if bought well, Not " if bought any time at any price on any yield"

3, Yeah, and remember that the figures I used were a very rough outline, It's not going to be exactly that accross the board. I was just offering an outline of the way I think.

 

[Tysonboss1]

Yes, the tide has turned. Mining boom, first home vendors boost etc.

But, in time, mining will return to normal, and, so will our outlooks.. booms never last forever, especially in a country suc as ours where we offer nothing else (partially because our government is incompetent)

So, eventually it will all tank, when? who knows... China will crumble in a heap at some stage, all superpowers do.

How does that relate to my quote.

 

[Glen48]

Maybe she does her pay slip up each week???
Made off eat ur heart out her come another one.

 

[medicowallet]

How does that relate to my quote.

Because one of the reasons $60k seems low is that other jobs have crept over the top.

The reason why we have low unemployment (if you disregard the tripe the media vomits up about how the mining industry cut X% of jobs over the GFC) is because of the flow on $$$ from the mining boom.

 

[medicowallet]

1, Note, I said if bought well, Not " If bought any time at any price"

2, Note, I said if bought well, Not " if bought any time at any price on any yield"

3, Yeah, and remember that the figures I used were a very rough outline, It's not going to be exactly that accross the board. I was just offering an outline of the way I think.

Fair enough..

So I guess to correct my calculation, prices have to fall..

 

[sptrawler]

Yes, the tide has turned. Mining boom, first home vendors boost etc.

But, in time, mining will return to normal, and, so will our outlooks.. booms never last forever, especially in a country suc as ours where we offer nothing else (partially because our government is incompetent)

So, eventually it will all tank, when? who knows... China will crumble in a heap at some stage, all superpowers do.

That quote is the key to the whole property debate. Not wanting to be a prophet of doom, but it is simple market dynamics.
We are riding a mining boom, so the mining companies gear up production untill there is an oversupply with a resultant drop in prices. Then the high recovery cost miners become unviable, leading to an increase in unemployment.
People 50 and over have seen it before, their children haven't. China doesn't have to crumble, just a slowdown will expose our high dependancy on mining.
Just enjoy it while you can, as the saying goes make hay while the sun shines, but nothing is forever.

 

[Tysonboss1]

Fair enough..

So I guess to correct my calculation, prices have to fall..

Either a Fall or a decent period of stagnation to allow inflation to make up the differrence to bring them back to 'Fair Value',

But to "Buy Well" you would be buying underfair value on higher yield, or buying into a situation where you can increase the yield in a relativily short time frame.

 

[medicowallet]

Either a Fall or a decent period of stagnation to allow inflation to make up the differrence to bring them back to 'Fair Value',

But to "Buy Well" you would be buying underfair value on higher yield, or buying into a situation where you can increase the yield in a relativily short time frame.

And I still think that a lot of people who think that they are doing this atm are in disneyland.

Cash is king atm, even with the recent interest rate cut.

 

[Beej]

I have been looking within about 10km of the CBD, and most 1 bedroom units are still about 500k. So the smallest starting price is about 500k.

Just to add one thing to what others have already said - it's not clear which city you are in but it sounds like it might be Sydney? Anyway if it is Sydney, you can buy a 1 bed flat within 10kms of the city for significantly less than $500k easily. Many places are available for half that in fact. Here's a nice looking place in Annandale for around $340k: http://www.domain.com.au/Property/For-Sale/Apartment-Unit-Flat/NSW/Annandale/?adid=2009336041 as just one example.

So I think the whole premise of your argument might be wrong!

In addition to that, you are not factoring in any future income growth in your scenario, or the ability to use dual incomes *initially* to pay down a mortgage so that you can then afford to live on one income comfortably a few years down the track. That's what most people do.

 

[Tysonboss1]

Cash is king atm, even with the recent interest rate cut.

Time will tell,

I think quality businesses, at low multiples are always King,