House prices to keep rising for years

[2BAD4U]

Hi all
I have been reading nearly all comments in this thread, one thing I dont understand is when people say that we will not have a property crash.
It happens in USA, Europe ect. What is the reason that it happend in those countries? and why can`t it happen here.

It can, but many of us don't believe it will. There are two main reasons that I see. Firstly we have a growing population which will always stimulate the housing market. Secondly we have tighter regulation of our lending ie: in the US you just hand back the keys and walk away from the house & debt and that's the end of it. Over here you can't do that. Your only option is to declare yourself bankrupt and many people would see this as an absolute last resort and be prepared to work through tough times to avoid it.

Now I will put on my flame proof suit and wait for all the bears with their buts and ifs.

 

[Beej]

I just dont see why i should buy a property and put myself deep into debt, when i can live renting in the best suburb in my city and save the difference as to what it would cost to buy the place im renting.

I dont want to live out in the suburbs and have to spend a lot of my time travelling etc. At the moment we (me and my partner) can both walk to work in the CBD within 20min, so we only have 1 car.

Here's a few brief calcs as to what 'intangibles' we are saving on by renting so close to the CBD (and our rent is the same as if we were to live a couple suburbs out, we have a good deal going).

[snip - reasonable rent near CBD vs buy in outer suburb calculation]

Prawn, no-one says you have to buy, you can keep doing what you are doing if it works for you that's just fine. BUT, you must understand that you are not making an affordability/price bubble argument as are most bear posters here. You are making a conscious lifestyle and location / expectation choice.

The exact same calculations/reasons why you like renting close to the CBD right now are also the fundamentals that support the much higher house prices commanded in those area's. Imagine you had the capital to pay cash for the place you currently live in - wouldn't all the exact same financial factors you cite above apply on the "why I should buy this place" argument as well? Think about it?

You also seem to have an aversion to taking on debt (ie mortgage) for housing, but you have no problem with paying someone else rent? To me they are both essentially the same thing in the short term, but very different in the long term - but that's just my view.

Cheers,

Beej

 

[finnsk]

It can, but many of us don't believe it will. There are two main reasons that I see. Firstly we have a growing population which will always stimulate the housing market.

Europe have a growing population as well

Secondly we have tighter regulation of our lending ie: in the US you just hand back the keys and walk away from the house & debt and that's the end of it. Over here you can't do that.

I am still in shock that it is possible to walk away from your responsibilities like that, but that does not explain why Europe is dropping in prices

 

[kincella]

prawn....I dont want you to change your mind or your circumstances....
being a prop investor we need people like you to rent our props from us....

so far I believe the mix is 70% are home owners...30% are renters....
which means of those 70% homeowners...30% of them are also property investors... or roughly...some have multiple properties and some have none...doubtful too many renters would be investors...but who knows..

I think the stats have changed from the 60/40 ratio. from the past....

overtime todays renters will be owners in the future and the cycle goes around....
which leads me to be confident in being a property investor....
we do not want you renters to suddenly start becoming owners,,,,or change the stats by too much....
you have no argument from me....
but my posts are probably more for the renters who want to become owners
cheers

 

[numbercruncher]

It can, but many of us don't believe it will. There are two main reasons that I see. Firstly we have a growing population which will always stimulate the housing market. .

Temporary spike, Immigration about to be slashed surely etc etc ...

The net growth in population occurred in the 80s and 90s but is set to decline in the next 15 years, Salt told an Australian Institute of Superannuation Trustees meeting in Melbourne.

“The past 30 years has delivered a pool of wealthy Australians,” he said.

“According to the 2006 census, Australians reach their peak earning period when they are between 40 and 50 years old.”

After 50, they, particularly baby boomers, start spending and their wealth declines until about 70, when the pension kicks in.

While population growth overall slows down, the retiring population will rise dramatically during the next 15 years and they will need managing carefully.

Australia is now beginning to suffer a fall in its net working population, and this is predicted to continue for the next 50 years.

“The baby boomers arrived in the workforce in a rising labour market and they could dictate their terms,” he said.

“Generation Y has arrived in a labour market that was rising more slowly.

“Now we are seeing the transfer of power in the workforce from the employer to the employee.”

http://www.egoli.com.au/epiServer/Templates/Public/Pages/StoryArticle.aspx?id=33961&epslanguage=en&AspxAutoDetectCookieSupport=1


Superfunds smashed, share portfolios smashed, unemployment rising, Job advertisments getting smashed .....

We still have fruit salad though, prices to boom for decades !

ps. news im watching now China says effect on her economy is being underestimated, massive unemployment expected ...

 

[nomore4s]

These property threads make me laugh.

I have noticed alot of the perma bulls in these threads are already well established in the property markets with multiple properties. Now I don't blame them for being bullish because if I was in the same position with good gearing levels and nice income from property brought before/at the start of the boom I too would not be selling and have a positive outlook.

What most of the perma bulls can't seem to get their heads around is there are people out there in different circumstances to them and the fact for someone out of the market or people earning average wages the property market is currently expensive whether you want an investment property or a home to live in.
Not everyone has $100,000 to put down for a deposit, not everyone can afford to pay $650+ a week in repayments for a $350,000 house, not everyone earns $75,000+ a year.
They carry on about improving your earning capacity etc,etc but not everyone is capable of doing this. Also most people nowadays just don't know how to save money or budget, everyone seems to want everything now.

Now imo for the property market to continue to grow at it's current rate you need new money flowing into the market pushing prices upwards, but I see it getting harder and harder for new money to enter the market atm especially if the banks continue to tighten lending standards.
So we either have to see wages jump sharply or house prices come down to become more affordable, in the current economic conditions I know which is more likely atm.

Most of the bulls seem unwilling to admit that property has seen a boom and that is normally followed by some sort of bust.
Surely some of you bulls must admit that property is overpriced and expensive atm, especially on a house price to average earnings ratio?

It also amuses me how the bulls think we will be immune from the carnage happening in the rest of the world especially the western world, they may be right but I have serious doubts about that.

No doubt there is money to be made from property but I think there will be better opportunties in the near future.

 

[prawn_86]

You also seem to have an aversion to taking on debt (ie mortgage) for housing, but you have no problem with paying someone else rent? To me they are both essentially the same thing in the short term, but very different in the long term - but that's just my view.

No aversion to debt, i just believe that the income (either saved through not renting and living in a PPOR, or through renting an investment property) should be able to pay off at least some of the principal, not be relying solely on capital growth. On that basic premise i think either property needs to come down, or wages need to rise significantly so that the 'average' wage can afford a house.

As i have said before, most people wouldnt buy a business making a loss (IE negative geared house), so why should they do the same with housing (unless they expect to be able to reduce the mortgage down quickly)?

Surely some of you bulls must admit that property is overpriced and expensive atm, especially on a house price to average earnings ratio?

Totally agree with this statement

 

[kincella]

guys, just a couple of points...two incomes can surely afford a 300,000 place or less...interest rate at 4% = 12000 pa or 1000pm for the interest component...
the other point from a prop investor view...is the capital gains at the end of the exercise.....its not the rental that gets me excited...its the end game

this striving for wages to go up or house prices to come down will get you nowhere...like you want to go back to a time when thats how it was....but the wages were so much lower....
and as for the population...we have lots more wealthier people today...its not millions of poor people and one alan bond any more....I think we made it to 1 million people were millionaires in oz this year...so you are competing against a lot more people who can afford these houses....

what if the wheel has turned and the majority become renters as in europe ??? they will never be able to afford their home.....its really just an aussie abhoration this single minded view...that you must own your own home,,,,forget it and enjoy life regardless

 

[kincella]

nomore4s....you are in Darwin....the most expenseive place on the planet imo...and rents are so high...what are you doing up there ???

prawns in Adelaide...again its expensive.......done a big growth spurt,,,may do it again with Olympic Dam going ahead as an open cut....

Melb is bigger, better and cheaper...from what I can see of Melb prices....

most people with the complaints seem to be stuck in WA.....but not earning the big dollars ????

 

[grace]

So, what would you rather buy, stocks down 41% for the year, or property down at a much lower pace?

I will be a buyer of property, but not yet!

 

[numbercruncher]

guys, just a couple of points...two incomes can surely afford a 300,000 place or less...interest rate at 4% = 12000 pa or 1000pm for the interest component...
the other point from a prop investor view...is the capital gains at the end of the exercise.....its not the rental that gets me excited...its the end game

2 incomes for the cheapest houses, yes its that big a joke in Australia it seems ? ....

interest rate at 4%

Whos doing 4pc mortgages then ? is it implied they wont again rise ? perhaps even rapidly ?

 

[nomore4s]

nomore4s....you are in Darwin....the most expenseive place on the planet imo...and rents are so high...what are you doing up there ???

lol, ability to earn good money here, and the lifestyle is good if you can stand the heat. But you are right it is extremely expensive up here.

Rents are high, but I'm renting off a mate and have just moved into a brand new 3 bedroom place for the same as I was paying on my mortgage for a 2 bedroom unit, but now the interest from the proceeds of the sale of the unit pay more than half the rent.

I will buy again but not yet.

 

[kincella]

think Nab and CBA both doing a 1 year fixed atm....but lower rates are on the cards and you will be able to fix for 3 years at least...nab have a 3 year fixed at 5.49 ...now...but you could take out a variable and then fix it as they come down.....
2009 will be rather nasty on the market and the scaredy cats companies dumping staff..and everything they can lay their hands on......
all knee jerk reactions....you can expect a bumpy ride....no smooth sailing this year

 

[Lancelot]

I guess we could use that as a subject of debate, if you had 100K cash would you invest it in the ASX 200 ETF (that pays 10% income) or would you use it as a deposit on a property (that is cost neutral)? Which would win in say 5 years? Anybody?

$100k @10% compounding over 5 years = $161k...................$61,000 up
Pay tax = $42000 profit

$100k as deposit for $500k property at a conservative 5% over 5 years = $638,000.........$138,000 up TAX FREE

 

[numbercruncher]

$100k @10% compounding over 5 years = $161k...................$61,000 up
Pay tax = $42000 profit

$100k as deposit for $500k property at a conservative 5% over 5 years = $638,000.........$138,000 up TAX FREE

You ASSume the shares dont/wont rise in value ? you assume the shares dividends arnt already franked/taxed ?

 

[Lancelot]

What most of the perma bulls can't seem to get their heads around is there are people out there in different circumstances to them and the fact for someone out of the market or people earning average wages the property market is currently expensive whether you want an investment property or a home to live in.

Just like in this 1970's article
https://www.aussiestockforums.com/forums/showpost.php?p=378788&postcount=2744

Not everyone has $100,000 to put down for a deposit, not everyone can afford to pay $650+ a week in repayments for a $350,000 house, not everyone earns $75,000+ a year.

Not everyone gets to own a house, it was never a requirment in previous generations, why do you feel it is now?

They carry on about improving your earning capacity etc,etc but not everyone is capable of doing this. Also most people nowadays just don't know how to save money or budget, everyone seems to want everything now.

Yep, these are the renters

Now imo for the property market to continue to grow at it's current rate you need new money flowing into the market pushing prices upwards, but I see it getting harder and harder for new money to enter the market atm especially if the banks continue to tighten lending standards.
So we either have to see wages jump sharply or house prices come down to become more affordable, in the current economic conditions I know which is more likely atm.

Or house prices sit flat for several years, some that have to sell will and possibly at a lower price, but most wont as they dont have to sell

Most of the bulls seem unwilling to admit that property has seen a boom and that is normally followed by some sort of bust.

Or flattening, stagnation

Surely some of you bulls must admit that property is overpriced and expensive atm, especially on a house price to average earnings ratio?

In some areas for some earners, $50k earner finds a $500k unit expensive, a $100k earner finds a $400k house cheap

It also amuses me how the bulls think we will be immune from the carnage happening in the rest of the world especially the western world, they may be right but I have serious doubts about that.

We do seem better positioned with know where near the vacancy rates and defaults as other countries

 

[Lancelot]

You ASSume the shares dont/wont rise in value ? you assume the shares dividends arnt already franked/taxed ?

Goalposts changing?

Even if they are franked/taxed the figures on the property example are miles infront.

 

[numbercruncher]

Goalposts changing?

Yes and you changed them again, lets stick to " House prices to keep rising for years " - already proved wrong with prices down last few quarters ....

 

[Lancelot]

Yes and you changed them again, lets stick to " House prices to keep rising for years "

Where did I change the goalposts? examples please

- already proved wrong with prices down last few quarters ....

Do I need to refer you to the links I posted earlier that show prices in my areas still going up?

Oh, you mean house prices AROUND YOU are dropping, therefore they are everywhere

 

[numbercruncher]

Over all medians are down .... ....

But it does warm the cockles of my heart to know that yours and robis apartments are going up each month ....