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House prices to keep rising for years

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hello,

oh no, we are all doomed

join all the crew down at centrelink, the army, salvo's, anglicare, soup bus etc

thankyou
robots
 
lioness said:
Now answer me this everyone on fundamentals HOW can house prices collapse when we have strong employment, housing and rental shortage and an interest rate cycle about to come down 1% over the next year and a country obsessed with home ownership.

I see it flat to negative 5% at the worst and so what if that happens, they have gone up 600% anyway.:confused:
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Look to the motherland.

The only fundamental is credit.
 
hello,

great work subaru69,

kimosabi is good at pulling up some parodies of myself, I especially liked the dancing one,

but low and behold havent heard from Kimosabi for a while now, I guess still "looking" at WA property

thankyou
robots
 
How many homes would be purchased if we all had to pay cash upfront? What would the price of a home be? That's a silly question, but could be an interesting answer.

According to "fundamentals" why isn't every house $1M+ ? After all, everybody needs a roof over their heads, wages always go up, population is always growing, there is always demand... What sets prices? It's a lot more complex than simply supply and demand.
 
Hate to say it but a few good sales at fair prices in syds north last 2 weeks.

Places not selling are being taken off market too so not much around now.
 
gfresh said:
How many homes would be purchased if we all had to pay cash upfront? What would the price of a home be? That's a silly question, but could be an interesting answer.

According to "fundamentals" why isn't every house $1M+ ? After all, everybody needs a roof over their heads, wages always go up, population is always growing, there is always demand... What sets prices? It's a lot more complex than simply supply and demand.
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Come on, a bit of basic economics called rate of return is the most significant factor in setting prices. Only have to look at Tassie 2002-03, prior to that could get net rental return (8%+) that allowed positive gearing which is why prices jumped 60% in 6 months coz mainlanders realised that and had oodles of equity available in their homes which had also boomed over previous 2 years. Equity flowed to highest rates of return, until it came down to more realistic 5%.

Of course this probably only holds for the bottom 70% of properties, as top 30% are not bought for potential returns. Some may also argue that most properties aren't bought for rental returns so why would that set prices, but investors are a big proportion of the market now, which means they play their part in the price setting.

Just my :2twocents
 
gfresh said:
How many homes would be purchased if we all had to pay cash upfront? What would the price of a home be? That's a silly question, but could be an interesting answer.

According to "fundamentals" why isn't every house $1M+ ? After all, everybody needs a roof over their heads, wages always go up, population is always growing, there is always demand... What sets prices? It's a lot more complex than simply supply and demand.
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Yes well, you are forgetting the COST of actually BUILDING a house. That is a VERY important factor in the value of improved property generally. As is the rental return as already pointed out. Then there is the demand side, which will input into prices based on the desirability of the location (land).

Ie, even if there was no credit (which will never happen), do you think people would expect to pay the same for a house (all other things being equal) that was 5 kms from the CBD, or say Coogee beach etc, than one that was 30kms away? Markets work this stuff out!

Let's imagine there was never any credit, and assume (as is the case) that land supply is limited. All that would happen is some people at sometime will have saved and acquired an asset (some land) and built a house on it (also with saved $$$). The people that get all the land and build the houses first would be the people who can save the most money the fastest. The best of these would get the best located land and build the biggest/best/higher quality houses. Then, of course very very few of these people would EVER sell for less than that land/house is "worth" to them - which is what they paid for the land + what the house cost to build, plus the "hassle" factor accounting for the fact all the hard work has now been done. Then of course the demand factor comes in - Ie other people who have saved more money than other people would bid up the prices of the best houses in the most desirable locations.

You would ultimately end up with a very similar situation to what we have, except there would be a lot less turn-over of property, and most of it would be owned by the richest members of society. Remember even if land was given away, a very basic house still costs $150k-$200k minimum to build - how many people would ever be capable of saving that much money in a reasonable time? Not many. But even so - if you paid $200k to build a house, would you sell it to anyone for any less? Especially after a few years when the cost to build a house might now be $300k?

Of course what the above demonstrates is why we do have, and will always have credit in a functioning capitalist, market based economy. Credit enables us to acquire the asset based on capacity to save into the future, and get the house now when we need it, rather than having to wait until we retire before being able to afford a house to raise a family in etc. The system should/could exclude people with no hope of ever being able to save enough into the future to pay for their asset - they will be perma-renters, and thus in their own way help sustain the value of property as an asset by providing the market with a baseline of renters and thus set the expected rate of return from property. Add to this all the people who rent by choice for various reasons (the young, the transient etc).

And before everyone jumps in and starts whining that houses are too expensive and no-one can afford them now etc etc - that's BS! There are plenty of affordable houses in all major Aussie cities. Even Sydney has loads of houses in the mid $200k range, which is barely above to actual cost of building a house. What we have in Australia is a housing expectation crisis - many who want a house want one that they can't actually afford, but are unwilling to compromise their expectations down to what they can afford. But that's fine, they will by choice add themselves to the rental market, there-by continuing to support the existing "high" prices (especially in the desirable areas in which they want to live) by confirming and increasing the rate of return on property! :)

And so the cycle continues....

Cheers,

Beej
 
hello,

great post Beej, all RE threads should commence with words like those, fantastic

plenty around that is affordable in all capital cities

thankyou
robots
 
Oh yea and that reminds me of my other "whinge" about the "house price whingers". Everyone focuses so much on how high the MEDIAN house price is. Fair enough statistically speaking, but who ever said that ALL FIRST HOME BUYERS should expect to get a median house easily? The median house the one in the middle when you line up all house prices. If you presume that most people will "trade up" at least once or twice in their lifetimes, then the median house is really the SECOND house purchase for most buyers. Unless you earn higher income than the average by a fair margin - in which case go for your life and start as high up the ladder as you can!

So first home buyers on average incomes should be looking at houses priced well below the median to determine their affordability.... Ie, no-one expects that an average income earning single wage family should be able to buy a $500k median house - they should be looking at the houses in the $250k-$300k range, hopefully after saving a good deposit. This represents a house at 4-5 times their wages (single average wage of ~$60k). For a typical "working family" on $80k (earnings including some part time work for the spouse), that's 3-4 times wages, which sounds extremely affordable to me.....

...... and also hence why the market is happily bobbing along at the current levels.

Cheers,

Beej
 
Beej,

The very same arguments as yours were put forth six months ago here.
 

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wayneL said:
Beej,

The very same arguments as yours were put forth six months ago here.
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:) So? Where have they fallen from? Are houses in London cheap? House prices have fallen 5% in the last few months here in Sydney too - but they went up by 10% (unexpectedly) the year before. The thing is, that's all that's going to happen IMO. This is a temporary situation - the market has been here before many times before. From here expect a plateau for a while (property has had a good run for a few good years).

PS I can remember several times in the past as well (early 90s for example) when people I knew who had moved from the UK described how horrible the house market was over there and how much it had fallen - in Oz our market does not historically seem to get hit as hard as the UK in downturns.

Time will tell! :)

Cheers,

Beej
 
BeeJ, my question wasn't an attack on affordability (re-reading, maybe it seemed that way), but more a rhetorical question as to what really defines house prices, and people's thoughts as to why they are valued as they are. You've provided some good answers :)

I will agree somewhat with house prices being more affordable than some whinge about.. plenty of $300k properties in both Brisbane, Goldcoast and Melbourne. Sure they are not large, but they are livable, and usually within good distance to transport or major roads. In fact Melbourne has quite a few places within 20km of Melbourne where you can still buy a 3br house for under $350k if you are not too fussy on the area. People want everything these days.

To be fair though Wayne, there has not been the massive rationing of credit here yet, as it seems in the UK - with institutions with much higher US exposure, **** scared of losing further money off their books. Not sure it will happen here either, as long as the exposure our banks are telling us is minimal.
 
http://au.biz.yahoo.com/080812/19/1vsad.html

Philip Lowe, Assistant Governor at the Reserve Bank of Australia (RBA), also gave a clean bill of health to the country's banking system and shot down calls for official help for the home loan market.

In a speech to a retail finance conference, Lowe noted that just over 0.4 percent of Australian banks' mortgages were more than 90 days in arrears, while arrears on loans that had been securitised were at 0.55 percent.

"These figures have increased from the very low levels seen between 2002 and 200, and are likely to increase further with the economy slowing, but remain considerably below comparable figures for many other countries," said Lowe.

He noted that in the United States around 2.2 percent of banks' residential mortgages were non-performing. In the UK, around 1.3 percent of the number of loans was in arrears by 90 days or more.
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2.2% is abyssmal, fortunately our (less mature) credit market compared to the US is substantially different (as has been pointed out many times before, without any irrefutable evidence to the contrary).
 
Beej said:
Ie, no-one expects that an average income earning single wage family should be able to buy a $500k median house - they should be looking at the houses in the $250k-$300k range, hopefully after saving a good deposit. This represents a house at 4-5 times their wages (single average wage of ~$60k). For a typical "working family" on $80k (earnings including some part time work for the spouse), that's 3-4 times wages, which sounds extremely affordable to me.....
Beej
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So the average household should only be able to afford a house which costs 30-40% below the average. Interesting..
 
xoa said:
So the average household should only be able to afford a house which costs 30-40% below the average. Interesting..
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As a FIRST home yes - that's the way it's always been. Who do you think should be buying the cheaper houses or units?? Minimum wage earners? People on welfare? That's how you end up with a US style sub-prime problem (which we don't have!). After building up some equity over time people move up the property ladder....

Cheers,

Beej
 
Beej said:
As a FIRST home yes - that's the way it's always been. After building up some equity over time people move up the property ladder....

Cheers,

Beej
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This is the part I have the problem with, every time you buy and sell you have cost, real estate, lawyers, bigger mortgage ect. where is the advantage for mums and dads to keep on upgrading there family home.
 
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