The future of Australian property prices

[prawn_86]

I have provided more explanation in another forum. Am happy to answer more questions after you have taken a look. I'm just saving myself the trouble of reproducing the entire story here. Here is the link:

http://bubblepedia.net.au/tiki-view_forum_thread.php?comments_parentId=25049&topics_sort_mode=lastPost_desc&forumId=7

I've read that post but i still dont quite understand.

You are assuming gold will go up 25% pa in a straight line. Ignoring this huge assumption, what % of house price 'falls' in this graph is simply attributed to gold increasing? IE couldnt gold just go higher and house prices stay the same.

I still dont see what meaningful relationship there is between the 2 assets...

 

[tech/a]

Someone has too much time on their hands.
Basically the projection is a 25% increase in gold /year V number of ounces required to hold X value in housing.
If gold rises the graph plummets.
Gold falls----well the opposite.

 

[prawn_86]

Someone has too much time on their hands.
Basically the projection is a 25% increase in gold /year V number of ounces required to hold X value in housing.
If gold rises the graph plummets.
Gold falls----well the opposite.

Yeh that's my thoughts also. Unless there is a strong correlation between the 2, or a historical link then i dont see how this data is useful.

I must admit its nice having something else to think/talk about on this thread though and its good to see members posting up actual thought out analysis, instead of just "property will go up/crash".

 

[Bintang]

Someone has too much time on their hands.
Basically the projection is a 25% increase in gold /year V number of ounces required to hold X value in housing.
If gold rises the graph plummets.
Gold falls----well the opposite.

Quite the opposite actually. For those wishing to see house prices stay aloft they should hope for the highest gold price possible. If US$ gold price slows its ascent below the 25% pa I have assumed the Australian house price index will fall more steeply.

 

[Glen48]

It all depends in the times you are living in, if there is a war you are going to think about moving some where safe, know the cost of power is to rise you look at alternatives, worried about fiat money failing you look at other forms of security, house prices are seen as a risk so you sit back and wait until you decide what to do next.
If enough think the same way prices rise or fall.
Circumstances change so you have to as well whether you like it or not. Growth is optional, change is inevitable.
The smart ones can see and adapt.
If Henry Ford was born in 1400's he would not have been famous because the opportunities were not there just like now electronic and new plastic will be the future but not there in the 30's.
House prices are going the same way as buggy whips PM's are going the same way as Mr. Fords new mode of transport

 

[tech/a]

It all depends in the times you are living in, if there is a war you are going to think about moving some where safe, know the cost of power is to rise you look at alternatives, worried about fiat money failing you look at other forms of security, house prices are seen as a risk so you sit back and wait until you decide what to do next.
If enough think the same way prices rise or fall.
Circumstances change so you have to as well whether you like it or not. Growth is optional, change is inevitable.
The smart ones can see and adapt.
If Henry Ford was born in 1400's he would not have been famous because the opportunities were not there just like now electronic and new plastic will be the future but not there in the 30's.
House prices are going the same way as buggy whips PM's are going the same way as Mr. Fords new mode of transport

I once lived in a very nice buggy whip!!!

 

[Glen48]

Tech
Did you get the latex suit and chains and live in a house of ill repute.

 

[Bintang]

I've read that post but i still dont quite understand.
You are assuming gold will go up 25% pa in a straight line. Ignoring this huge assumption, what % of house price 'falls' in this graph is simply attributed to gold increasing? IE couldnt gold just go higher and house prices stay the same.
I still dont see what meaningful relationship there is between the 2 assets...

My main premise (based purely on observation and of course is subject to challenge) is that the ratio of house prices to gold price (in the same currency as the house prices) could follow a fixed downward trajectory and bottom-out at a value of around 100 oz. Thus at a future time (say within the next 4 to 5 years) the value of that ratio will have a fixed value (though different for the different markets, USA, UK, AUS & NZ). There are 5 ways in which the lower fixed values of that ratio can be reached.
1) House prices don’t change but gold price keeps going up – but steeply.
2) House prices go up and gold price goes up – but even more steeply.
3) Gold price doesn’t change and house prices go down – but steeply.
4) Gold price goes down and house prices go down – but even more steeply.
5) Something in between the above extremes.

All this raises an interesting conundrum from the perspective of a prospective property investor. If I badly want to see a house price 'soft landing' or even a price revival and I believe in my premise then I will want to see a very high future gold price. But if I seriously believe that will happen then I should be buying gold not houses.

 

[Eager]

Just a general comment - after 360 pages of guesses, estimates, opinions and good ol' speculation in this thread, has anyone actually got it right yet?

 

[Tysonboss1]

My main premise (based purely on observation and of course is subject to challenge) is that the ratio of house prices to gold price (in the same currency as the house prices) could follow a fixed downward trajectory and bottom-out at a value of around 100 oz. .

I can't see how the two are connected,

Both are tradable commodities who's price will flucuate over time , there will be times where gold is massively over valued, and times when it is massively under, same with property.

There is absoulutly no value in such an obscure method of valuing realestate.

Why not just value each piece of real estate on it's merits, eg. cashflow produced and development potencial.

 

[Glen48]

You are eager,Eager
yes they will go down like white ants eating away one bite at a time and one day it will all be over but not until USA stop tanking.
PM"s will go up the same way.
But Gold etc is driven by worry and security nothing else.
See what happens soon in Iran it explodes PM's will go up.

 

[trainspotter]

Just a general comment - after 360 pages of guesses, estimates, opinions and good ol' speculation in this thread, has anyone actually got it right yet?

Just Robots !

 

[Bintang]

I can't see how the two are connected.....

They are connected by the ratio of House Price to Gold Price as per this chart:

But I happily acknowldege that my forecast is an extrapolation, which could be completely and utterly wrong. So let's lets assume it is wrong and reverse the analysis. Let's assume that the Australian median house price will stop declining in 2012 and revive to 7% per annum growth for the next 5 years. Let's further assume that the US$ gold price growth will slow to 5% pa over the same period. and that the US$:AUS$ exchange rate will average 1.05 (in deference to Julia Gillard who told us this week that she expects the Australian dollar to remain 'relatively strong' for years to come). After that we calculate future House/Price to Gold Price ratios and superimpose them on my previous chart to get ......:

 

[Glen48]

Australia has the highest priced RE in the World it can only go down as Prof Robots has confirmed by his silence.
In fact I think we should pass the hat around to assist him to buy Gold and help pay for the professional help he is seeking trying to work out where he went wrong.

 

[medicowallet]

"Saturday 4th February 2012






Today there has been 101 auctions with 59 selling and 42 being passed in. Of the auctions that were passed in 26 were on a vendors bid.

The clearance rate was 58 per cent.

As volumes remain low this results is unlikely to be indicative of the state of the market.

On this weekend last year there were 189 auctions and a clearance rate of 56 per cent.

Next weekend around 305 auctions are expected followed by 620 on the weekend of 18 and 19 February.

Enzo Raimondo
CEO REIV"

WOW!!!
Clearance rates ABOVE last year!!!!
Sunshine and lollipops for all.
Wonder why, with increased inventory, there were only 101 auctions this year compared to 189 last year?

Perhaps R/E agents are making so much money, they only need to do around half the work to make the same amount of money,

Anyways,
Nice stats, should see prices start to come up as these clearance rates keep improving, not that I am sure clearance rates have any correlation,

MW

P.S. Where is Robots?

 

[sptrawler]

The thing to keep in perspective is, interest rates are going down, if you can get 5% return on a property.
If that property is in an area where you think there maybe future capital growth and also has secure rental prospects, it is worth thinking about.
Wages may stay stagnant for a period, they may drop(but not by much)but if you pay $300k for a well located property that pulls $300/wk. It isn't a bad place to park some money.IMO
But you have to be selective with the property and cut a good deal. My thoughts only.

 

[Julia]

Australia has the highest priced RE in the World it can only go down as Prof Robots has confirmed by his silence.

We keep hearing this.
I had an email from a friend in Vancouver recently telling me that they have the highest priced RE in the world.

 

[Glen48]

I think Canada kept their rates high and a deposit was needed to buy a house and no first owners bribe but even if Oz is 2Nd or 3rd it is still bad news when Ireland has 300K vacant, Spain authorities are talking about bulldozing because they can't afford the upkeep, UK, Belgium,USA etc are all in trouble with over priced houses OZ must be due for a correction .

 

[trainspotter]

Been hearing this bleating for 3 years now !! Yes yes yes CERTAIN areas have dropped 20% as per my prediction and overall the market is around 3% down overall based on the 8 capital city average ..... DYOR and go by ABS figures !!

There is also areas that have increased by 20% ..... I even named the suburbs and towns over 2 years ago ....... Good luck punters.

 

[kincella]

Just a general comment - after 360 pages of guesses, estimates, opinions and good ol' speculation in this thread, has anyone actually got it right yet?

yes, several of us got it right....no crash, slowdown (it is the GFC in action) rises in some places, 'and most of all the median figure that is touted' as the evidence of a drop in prices, can be a misnomer...
less high priced places selling, plus more median and lower prices, cause the median figure to drop... voila there is your price drops of what 3, 6% big deal
and I have witnessed huge increases in the bottom end of the price range....so go figure

dont expect things to change much, while there is so much political misery....

once it is sorted out, and we get some good conservative politicians back into office, watch for the change in attitude....as in when Howard was in office...