The future of Australian property prices

[tech/a]

Deflation in the short term ---- next 10 years is un avoidable.

The un winding of world debt personal / institutional / government will
Leave a trail of destruction of the deflationary kind --- but after that!

 

[Mrmagoo]

You guys have such a narrow view.

Most of the boomers are freeholding asset for passive income.
They won't sell---won't/don't want to sell.

They will have taught their siblings the power of passive income going forward as well.
When they cark it many of them won't sell either.

Your glut of housing won't eventuate.

The demographics in SA alone over the next 30 yrs is 52000 new homes in the South
And 158000 in he North.

The thing that will smash house pricing is world economies.
But if youown it it won really matter that much --- passive income

Passive income is fine and I don't see why any government would want to tinker with that, it takes pressure off the public system. What will unwind will be investment in housing based on future expected capital gains.

As Gen Y start to having families they'll become a large group with a common interest and lets face it Gen Y is a hugely vast generation, which actually spans 2 or 3 generations and very few of them own their own homes. Some may have an "affordable" mortgage but those who have bought recently, which will entail the majority will be in hopeless debt and with little to no equity growth you can basically kiss goodbye one of your previous drivers of economic growth.

What this means is that when they start having children they'll become a voting block without equity. You can already see it happening. Very few people under 30 want house prices to increase. People older than that who do not already own a home generally do not want to see house price growth. This contrasts to the previous decade where one was able to just get on with the job and buy a property as growth in prices had not yet exceeded income by any and all measures.

I can see definite changes to the tax and legal system to control house price growth. Governments all over the world appear to have learned their lesson and some Asian countries have already taken these drastic steps to curb house price growth. I would not be surprised if the generational paradigm will be to view housing like bread a milk in that we want the value of these items to decrease relative to incomes over time, rather than increase. You've got to remember that you have a generation of people who have really been kicked in the guys pretty hard regarding housing. There have not been fun and games at all.

Never under estimate self interest. Young single people don't care, but once you put a crying screaming baby into the picture you're going to end up with a lot of very angry voters. Politicians will eventually respond. Good ole Ted in Victoria has already started the ball rolling, with mass land releases for his real estate mates. For a liberal he is definitely showing himself to be a champion of the people.

 

[Mrmagoo]

Deflation in the short term ---- next 10 years is un avoidable.

The un winding of world debt personal / institutional / government will
Leave a trail of destruction of the deflationary kind --- but after that!

The days of boom time are well and truly gone. To see similar growth you'll be looking at 600k-1 million dollar properties in the outer suburbs and as you have shown with the pay rates you give to your workers that is just not affordable by the average person and they yeild in that case could never justify the cost.

Even a 5% a year increase is still 25k a year on the average property, which means another 5k required on the deposit and I just can't see ordinary working people as able to make the down payment with that kind of growth.

House price are going to be either flat or down for a long time.

 

[tech/a]

The days of boom time are well and truly gone. To see similar growth you'll be looking at 600k-1 million dollar properties in the outer suburbs and as you have shown with the pay rates you give to your workers that is just not affordable by the average person and they yeild in that case could never justify the cost.

Even a 5% a year increase is still 25k a year on the average property, which means another 5k required on the deposit and I just can't see ordinary working people as able to make the down payment with that kind of growth.

House price are going to be either flat or down for a long time.

Don't know where your thinking of but all of my people live in areas where the median house price is around 400 k
Most bought even the younger ones in the 300s all partners work either full or part time. None are struggling.
A few rent $350 a week is average but both work as did my partner when I was younger.

 

[Sean K]

Are DINKS, delay in parenting and women in the workforce a consideration?

I haven't seen any figures or analysis on this but with women in the workforce for longer and less children this may drive up prices?

Maybe not..

 

[Mrmagoo]

Your supervisors get what ? 35 an hour ?

I'd hazard a guess take home would be around 1 - 1.2k a week with overtime. Mortgage payment is about 1257, add in rates and what not that is about 1320 a fortnight. So a bit over half the wage. Just for the mortgage. I'd say that fits the definition of mortgage stress pretty well. Add in utilities (i'm guessing they get a car on top of their wage but deduct the cost of just one car from the wage), food, misc expenses and you can probably kiss most of that income goodbye. Might be room for a little saving (say 200 a week).

Leaving the partners income. So you're in the situation of a working mother needs to support the family.

Hardly a good situation for a foreman. That is a pretty well paid supervisor. Never mind the normal workers.

Sure if you bought a few years ago for 300k you're in a better spot. None of this points to room for house price growth in the future.

 

[Mrmagoo]

Are DINKS, delay in parenting and women in the workforce a consideration?

I haven't seen any figures or analysis on this but with women in the workforce for longer and less children this may drive up prices?

Maybe not..

Nah. IMO DINK women just have higher expectations. I see them at work all the time. OMG A BABY MUST BUY BRAND NEW HOLDEN COMMO WAGON AS WE NEED IT FOR KID !!

Spend $4.5 in morning for coffee. Home made lunches more expensive than a shop bought one. Over seas holidays as a right of passage into knowledge. Can't live in a share house must get over priced apartment.

But as you said DINKS have the money so why not. I just can't see many of them saving it to reduce mortgage costs. They go into a tonne of debt instead.

 

[Bill M]

Are DINKS, delay in parenting and women in the workforce a consideration?

I haven't seen any figures or analysis on this but with women in the workforce for longer and less children this may drive up prices?

Maybe not..

Always has been kennas. Even when my wife and I bought our house in Sydney we gave up the idea of having kids in order to get ahead and that was 25 years ago. Today it would be the same, no different I would think.

 

[Sean K]

Nah. IMO DINK women just have higher expectations. I see them at work all the time. OMG A BABY MUST BUY BRAND NEW HOLDEN COMMO WAGON AS WE NEED IT FOR KID !!

Spend $4.5 in morning for coffee. Home made lunches more expensive than a shop bought one. Over seas holidays as a right of passage into knowledge. Can't live in a share house must get over priced apartment.

But as you said DINKS have the money so why not. I just can't see many of them saving it to reduce mortgage costs. They go into a tonne of debt instead.

I'm just guessing that instead of spending a million on the chillins education DINKS put it on the apartment, townhouse, or holiday, etc. One less kid, is worth a million spare cash flow these days. Instead of buying out in the burbs they buy close to the action within 5km of the city and there's limited space. yada yada... Might just be a minority that that effects and no price mover. Maybe grasping at straws.

Always has been kennas. Even when my wife and I bought our house in Sydney we gave up the idea of having kids in order to get ahead and that was 25 years ago. Today it would be the same, no different I would think.

Ack, thanks Bill. Only thoughts on personal situation. I know if I had a few kids I'd be living in Frankston, or Liverpool...

 

[Julia]

You guys have such a narrow view.

Most of the boomers are freeholding asset for passive income.
They won't sell---won't/don't want to sell.

They will have taught their siblings the power of passive income going forward as well.
When they cark it many of them won't sell either.

Your glut of housing won't eventuate.

The demographics in SA alone over the next 30 yrs is 52000 new homes in the South
And 158000 in he North.

The thing that will smash house pricing is world economies.
But if youown it it won really matter that much --- passive income

+1

You consider you have a monopoly on insults?

You responded to this as if I was personally insulted by you. Not so. I was just commenting on your saying how insulted you felt because some other poster didn't actually agree with you.

You said:

Have you priced a retirement home recently? We did the exercise a few years ago for a relative.... 300K bond and 60K a year!

I replied:

Perhaps you could describe the retirement situation you are referring to. There are hundreds of high quality retirement villages where people can buy a property. either freehold or leasehold, and still receive whatever level of care they need, at prices between $250K and $1M+.

This is just one example of my, politely, questioning one of your statements. A 'retirement home' would normally be considered a dwelling within a retirement village, certainly not a nursing home placement where a bond is required.
So imo a perfectly reasonable comment on my part.

. It is sobering to remember that under 1% of retirees make it fully self funded.

Again, because I'm a fully self funded retiree I'm interested in this and would like to have known the context of your claim here. I hardly think that's unreasonable. Your response was that it was from a comment by someone you know who made this assertion. Is that really a valid reference to such a definite assertion, stated as absolute fact? Not for me.

Nice retort, lead with a bit of passive aggression, step into a slur of arrogance, feign disinterest and exit stage right.

Oh please, spare me the pop psychology. You have made several assertions, most based on your opinion. That's fine. All opinions are welcome. No need to get aggressive when politely questioned as to the basis of those opinions.

 

[sydboy007]

You guys have such a narrow view.

Most of the boomers are freeholding asset for passive income.
They won't sell---won't/don't want to sell.

They will have taught their siblings the power of passive income going forward as well.
When they cark it many of them won't sell either.

Your glut of housing won't eventuate.

The demographics in SA alone over the next 30 yrs is 52000 new homes in the South
And 158000 in he North.

The thing that will smash house pricing is world economies.
But if youown it it won really matter that much --- passive income

You've totally missed the point.

That age cohort of the 55+ are going to be mostly gone over the next 30 years.

Look at my post with the age groups and housing.

Just look at how many spare bedrooms there are out there

There is no housing crisis. There is no shortage of housing (in general). Most households have at least a spare bedroom, quite a few have more than that.

There will be a huge increase in the number of properties for sale as the war generation and boomers fall off their perches. Though it seems like it, they wont live forever.

If there's an increase in housing stock for sale on the market, then that has to depress prices. It's not going to happen overnight, but it will ramp up over the coming decades.

Factor in that in aggregate terms Australian households just simply can't take on any more debt, then where do you think the price growth is going to come from? Mortgage debt is already 80% of GDP! If rents go up too fast then the number of spare bedrooms is going to decrease. There is a massive amount of excess capacity out there.

 

[CanOz]

Tend to agree, the only thing that has helped the US stop the slide is the fed...and their bloated balance sheet.

CanOz

 

[tech/a]

You've totally missed the pointi

In your opinion.

Fortunately your opinion has
No bearing on my future.

Self funded debt free with passive income.

Happy to have missed the point.

Evidently I'd missed the point in 1995 through 2003 as well.

You know you only have to get it right ONCE in a lifetime to
Join Julia in the 1%

 

[sydboy007]

In your opinion.

Fortunately your opinion has
No bearing on my future.

Self funded debt free with passive income.

Happy to have missed the point.

Evidently I'd missed the point in 1995 through 2003 as well.

You know you only have to get it right ONCE in a lifetime to
Join Julia in the 1%

So your historical experience has relevancy to the future of house prices?

I'm not sure how old you are, what what do you expect to happen to your primary residence and any IPs you may have when you've passed on? Unless things have changed, my understanding is that your family have 2 years to sell the house before they are liable for capital gains tax, so it would seem likely that the property holdings of the 55+ generations will be sold and the funds distributed, rather than held as n IP or as a primary residence for a family member.

Are you saying that because house prices skyrocketed over the 1995 - 2003 period that this is the likely thing to happen over the next 10-15 years?? Household debt sits at 155% of income. How high do you see this going to push house prices higher? Historically when it's hit 160% that seems to be the Oh s*&t moment and borrowing slows down for a bit.

MY basic argument is that:

* households already have too much debt to borrow much more
* rents are too low to justify investing in an IP as future capital gains will not be much above CPI.
* the 55+ age group already own a huge amount of the housing stock as their primary residence and IPs. As they pass away this will release a lot of established dwellings onto the market. As they move into assisted care and nursing homes they will need to their their primary residence and / or IPs to help fund this.
* A large proportion of renters have spare bedrooms. Should rents start to increase too fast then we will see this excess capacity used up to help reduce the individuals rental costs. How long that process goes on I don't know, but it will have a dampening effect on overall dwelling demand.
* Gen Y and the younger Gen X have become very wary of borrowing a huge amount of money to buy a property that involves long commute times and / or the need to own a car or become a 2 car family.

 

[Mrmagoo]

In your opinion.

Fortunately your opinion has
No bearing on my future.

Self funded debt free with passive income.

Happy to have missed the point.

Evidently I'd missed the point in 1995 through 2003 as well.

You know you only have to get it right ONCE in a lifetime to
Join Julia in the 1%

You guys had it handed to you. Julia got a 3% loan on her POPR during a time when prices were rock bottom and then they rose fast. Not hard to make a buck under those circumstances. All you needed was surplus income and a desire to invest.

Which is why you lot seem to think becoming wealth is just a matter of having the will to do so - because for your generation that is all that was required.

 

[Mrmagoo]

Factor in that in aggregate terms Australian households just simply can't take on any more debt, then where do you think the price growth is going to come from? Mortgage debt is already 80% of GDP! If rents go up too fast then the number of spare bedrooms is going to decrease. There is a massive amount of excess capacity out there.

That is more to the point. Sick of this home investing ponzi bull****. It has already caused far too much human misery around the world.

House prices are the CAUSE not a symptom ? Get it through your heads. Housing investment is a greed fueled evil which needs to be stamped out. Repeat after me - it is not the bankers it is housing investors ruining the world.

 

[orr]

You know you only have to get it right ONCE in a lifetime to
Join Julia in the 1%

You do notice the implicit out come there for the 99% Techo . That's a voting block to keep in mind. Mind you a lot better odds than the Lotto, unless you believe the advertising.
Who was it that coined the phrase 'a queit life of despiration' Thoreau ?

 

[tech/a]

Dont know what you guys are on about.

I agree prices are likely to fall further and then stay flat for som years.
Eventually deflation will give way to growth could be many years.

As for what my family does with assets when I'm out a here.
That will depend on their own situations at the time.
They will get advice when that time comes.
A way off I hope.

Yeh yeh we got it so so easy!
You guys have got it so so hard.
We've never seen hard times.

 

[sydboy007]

Dont know what you guys are on about.

I agree prices are likely to fall further and then stay flat for som years.
Eventually deflation will give way to growth could be many years.

As for what my family does with assets when I'm out a here.
That will depend on their own situations at the time.
They will get advice when that time comes.
A way off I hope.

Yeh yeh we got it so so easy!
You guys have got it so so hard.
We've never seen hard times.

I'm n the same boat as you, generally. I bought in 1997, but I know that it would be impossible for me to do the same now. a 270K loan in 97 is prob now around 388K with an avg 2.5% inflation rate over the intervening years.

So a 388K loan at 6.8% - that's the rough avg I'd paid over the life of my home loan - would cost me $2700 a month for 25 years. That's around 50% of my after tax income now. Now lets see what a 430K property would get me. Where I currently am, Erskineville Sydney, I'd be struggling to get much more than a 1 BR apartment, and most of those are older style and remind me of a battery hen cage.

Now, if I chose to rent in my area, I could get something similar to what I can afford for around $350-380 a week.

I know there's 13 months based on a weekly payment, but I'll let that extra month cover all the holding costs of owning a property. Buying = 2700 or Renting = $1520

So now I have $1180 in cash flow. What to do. Hmm. Considering how many shares are still offering grossed up dividend yields of 7%+, I think I'd like to buy meself 10K of shares each year. Will be interesting to see who's better prepared for retirement in 25 years.

I would argue that for a family, with the exponential cost of loan repayments for a house to fit a family in, the cost savings of renting to buying are even bigger. Factor in being able to afford to live somewhere that means you only need 1 car, you can prob find a months rent savings over a year just with that.

 

[Macquack]

Sick of this home investing ponzi bull****. It has already caused far too much human misery around the world.

House prices are the CAUSE not a symptom ? Get it through your heads. Housing investment is a greed fueled evil which needs to be stamped out. Repeat after me - it is not the bankers it is housing investors ruining the world.

Mrmagoo, you make some very good points.

Having said that, I disagree with your assessment of the perpetrators.

Housing investors are mere pawns in a much larger game.

Where do you think the money comes from?

Fiat money, the only unlimited resource on earth.