The future of Australian property prices

[young-gun]

I don't think Sydney or Brisbane has gone anywhere in the last few years - 'Sideways' ?

I was just taking the piss.

Brisbane(from the areas I know and have seen) hasn't really gone anywhere, backwards in some places.

There is always gonna be your one or two feel good stories about how they jagged the golden suburb, or golden property in a poorly performing suburb. As Julia often points out the gold coast has taken a beating, but I am sure there is someone that can find a property that has appreciated by a few % over the past couple of years.

Fact is prices are somewhat depressed in a lot of places, and the risk still favours the downside in my opinion. Until all the headwinds facing not only the australian economy but the global economy are rectified, not just painted over with a thin coat, I will remain pessimistic about aussie RE. I'll continue to sit sidelined for now, missing the real opportunities yada yada.

 

[Julia]

There is always gonna be your one or two feel good stories about how they jagged the golden suburb, or golden property in a poorly performing suburb. As Julia often points out the gold coast has taken a beating,

Just a correction here: I don't know anything about the Gold Coast. I've been referring to the Fraser Coast, about four hours north of Brisbane, where property is down 25 - 30%.
Anything over $500K is just sitting there.

Fact is prices are somewhat depressed in a lot of places, and the risk still favours the downside in my opinion. Until all the headwinds facing not only the australian economy but the global economy are rectified, not just painted over with a thin coat, I will remain pessimistic about aussie RE. I'll continue to sit sidelined for now, missing the real opportunities yada yada.

Agree. And there seems to have been little response to the interest rate cuts thus far.

 

[FlyingFox]

Just a correction here: I don't know anything about the Gold Coast. I've been referring to the Fraser Coast, about four hours north of Brisbane, where property is down 25 - 30%.
Anything over $500K is just sitting there.

GC is just as bad if not worse. My dad keeps getting emails and phone calls from agents regarding heavily discounted apartments etc. A lot of foreigners liquidated after the A$ starting going north of 80-90 cents after the GFC. Even at discounted rates they made money due to FX differences.

I remember we were talking to a friend who works for Stockland and he was saying it was really bad in the GC. Mind you this was a year ago. I have since moved to Melbourne (from Brisbane not GC) so I am not sure what the situation is like atm but I can't see it improving dramatically.

 

[Miss Hale]

RP data results discussed also in an article on the front page of today's Age focussing on the Melbourne market with the headline "City in grip of property slump". It also includes a bit of spruiking at the end from a couple of real estate agents for balance

However, some industry operators say the RBA's moves have laid the groundwork for a recovery this year and the current conditions are creating rare opportunities for buyers.

''Auction clearance rates have improved and that's directly related to the interest rate cuts,'' said Nigel O'Neil, chief executive of agency Hocking Stuart. About 60 per cent of homes going under the hammer last spring sold, compared with barely half at the same time in 2011.

''There's definitely evidence that suggests if the rate cuts continue - which is important - then the market will continue to strengthen,'' Mr O'Neil said.

Richard Wakelin, director of Wakelin Property Advisory, said the decline in the cost of borrowing could be a ''tipping point'' for buyers.

''Some people - those who feel pretty secure in their employment - are going to see that now is the time for them to make their move. Interest rates are well down, prices have come off in some areas, and that's going to prove very attractive,'' he said.

http://www.theage.com.au/victoria/city-in-grip-of-property-slump-20130102-2c5oa.html

 

[young-gun]

Just a correction here: I don't know anything about the Gold Coast. I've been referring to the Fraser Coast, about four hours north of Brisbane, where property is down 25 - 30%.
Anything over $500K is just sitting there.

Apologies, I think I picked up gold coast from a back and forth of kincella and yourself, my mistake.

 

[FlyingFox]

RP data results discussed also in an article on the front page of today's Age focussing on the Melbourne market with the headline "City in grip of property slump". It also includes a bit of spruiking at the end from a couple of real estate agents for balance



http://www.theage.com.au/victoria/city-in-grip-of-property-slump-20130102-2c5oa.html

I thought this was an interesting opinion piece with an "outsiders" perspective on house prices in general but especially in Melbourne. Granted this is on the exceptional end of things.

http://www.prosper.org.au/2012/11/01/goodbye-to-high-land-prices/

 

[Miss Hale]

I thought this was an interesting opinion piece with an "outsiders" perspective on house prices in general but especially in Melbourne. Granted this is on the exceptional end of things.

http://www.prosper.org.au/2012/11/01/goodbye-to-high-land-prices/

Thanks FlyingFox, that article is interesting. Really puts into perspective the crazy situation we are in here.

 

[prawn_86]

I thought this was an interesting opinion piece with an "outsiders" perspective on house prices in general but especially in Melbourne. Granted this is on the exceptional end of things.

http://www.prosper.org.au/2012/11/01/goodbye-to-high-land-prices/

Thanks FlyingFox, that article is interesting. Really puts into perspective the crazy situation we are in here.

I had a read too, it is interesting. Depending on what stats you use, but we are in the top 10% for gross household income, and yet still would not be comfortable servicing a 1m mortgage (let alone a 2 - 4m dollar one in Port Melbounre), it would be basically an interest only loan and there is no way we would have it paid off in 30 years, based on paying 30% of our gross income off the mortgage.

I just fail to see how/why people in the top 10% of income cannot easily and/or comfortably afford a house in the top 10% of suburbs, something seems a bit out of whack to me.

 

[Trembling Hand]

I just fail to see how/why people in the top 10% of income cannot easily and/or comfortably afford a house in the top 10% of suburbs, something seems a bit out of whack to me.

Yeah but this is more out of wack,

With our combined income, on paper, I think would put us in the top 1% of all earners in Australia. We have cut our lifestyle to the bare minimum. We share a single car between the two of us. We rarely go out to eat. All of our money goes to rent, childcare, and groceries.

BS!

 

[prawn_86]

Out of interest does anyone have or know how to get a distribution of house prices in Aus? I would be interested to know what price range the top 10% of homes in Aus are.

 

[FlyingFox]

I had a read too, it is interesting. Depending on what stats you use, but we are in the top 10% for gross household income, and yet still would not be comfortable servicing a 1m mortgage (let alone a 2 - 4m dollar one in Port Melbounre), it would be basically an interest only loan and there is no way we would have it paid off in 30 years, based on paying 30% of our gross income off the mortgage.

I just fail to see how/why people in the top 10% of income cannot easily and/or comfortably afford a house in the top 10% of suburbs, something seems a bit out of whack to me.

I have been asking myself this question as well. Any house in a decent suburb is 1M or close to it.

To answer your question about income distribution. Top 10% is gross income greater than $172,432 from Bureau of stats survey of income etc 2009-2010. http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6523.02009-10?OpenDocument . Appendix 3, Table A-5.

 

[McLovin]

I have been asking myself this question as well. Any house in a decent suburb is 1M or close to it.

To answer your question about income distribution. Top 10% is gross income greater than $172,432 from Bureau of stats survey of income etc 2009-2010. http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6523.02009-10?OpenDocument . Appendix 3, Table A-5.

p16 gives the 90th percentile as having household income/week of $1,448...

It's hard to believe that the top 10% is as high as $172k.

ETA: I see you're discussing gross, whereas I'm discussing disposable. How are the two tables supposed to be reconciled?

 

[FlyingFox]

p16 gives the 90th percentile as having household income/week of $1,448...

It's hard to believe that the top 10% is as high as $172k.

ETA: I see you're discussing gross, whereas I'm discussing disposable. How are the two tables supposed to be reconciled?

The table gives both those values side by side. The quoted disposable income has been adjusted for various things. Haven't gotten around to reading all the methodologies.

EDIT: I quoted gross household income in my prior post.

 

[Superb Parrot]

I just fail to see how/why people in the top 10% of income cannot easily and/or comfortably afford a house in the top 10% of suburbs, something seems a bit out of whack to me.

Is it overseas money creating this disconnect between house prices (in certain areas ) and (local) income ?

 

[tech/a]

I would argue that most in the top 10.% weren't there in the 10% when they bought their first home.
Their equity in any further home would be much greater than a first home buyer.

So a lower income purchaser would also have less equity.

 

[McLovin]

The table gives both those values side by side. The quoted disposable income has been adjusted for various things. Haven't gotten around to reading all the methodologies.

EDIT: I quoted gross household income in my prior post.

The two numbers confuse me. The one you quoted adjusts household income by dividing it by the number of people in the house and their age, the one I quoted is a raw number. I don't understand how the raw number can be so much lower than the adjusted number.

 

[prawn_86]

The two numbers confuse me. The one you quoted adjusts household income by dividing it by the number of people in the house and their age, the one I quoted is a raw number. I don't understand how the raw number can be so much lower than the adjusted number.

Yeh i noticed that a while back when i was looking at them months ago and was confused also.

 

[FlyingFox]

The two numbers confuse me. The one you quoted adjusts household income by dividing it by the number of people in the house and their age, the one I quoted is a raw number. I don't understand how the raw number can be so much lower than the adjusted number.

McLovin, its the other other way around. The number I quoted was unadjusted raw 90th percentile gross household annual income ($3316 per week). The number you quoted was the adjusted disposable household income ($1448 per week). Sorry, I can see why my post wasn't clear.

All the above information is in the Table I referenced previously.

 

[McLovin]

McLovin, its the other other way around. The number I quoted was unadjusted raw 90th percentile gross household annual income ($3316 per week). The number you quoted was the adjusted disposable household income ($1448 per week). Sorry, I can see why my post wasn't clear.

All the above information is in the Table I referenced previously.

You're right. I see now. Sorry, had the blinkers on!

 

[FlyingFox]

I would argue that most in the top 10.% weren't there in the 10% when they bought their first home.
Their equity in any further home would be much greater than a first home buyer.

So a lower income purchaser would also have less equity.

While I don't dispute this, I think the distortion in prices is much much greater than can be accounted for by this fact alone. Most buyers in the top 10-20% will have an extremely hard time buying a "house" in top 10-30 maybe even 40% of suburbs as their first home.

Personally I think this came about due to the fact that housing and housing investment has been marketed as get rich quick scheme with the governments not helping. Thus we have a housing market which focused primarily on capital gains and produced inflated prices.

Whether this continues depends very much on how many young people get suckered into propping up the Ponzi scheme (you may dispute this but pls have a very careful read of tech/a's comment).