House prices to keep rising for years

[Glen48]

You only make money out of property when you sell it, saying you have a house worth $10 gazzillion is nothing.
Houses prices go up and down just like shares an gold so you buy and sell as things change but if you sit there long term you get this:


http://www.miamicondoforum.com/wp-content/uploads/2008/12/pricechange.jpg


I realise Houses in USDA are different to OZ so some one can use try and use as an excuse but any consumable item is the same any where in the World.

 

[theasxgorilla]

Seen as australias 22m inhabitants are quickly running out of room and apparently atleast the next 3 generations wont be able to afford to purchase a property ..... just maybe we should round these pesky heathen non-home owners up and send them off to .........

It's an often heard remark this one, usually in response to arguments by property bulls that high property prices are a result of rising demand in response to such things as immigration. Yet its so easy to counter the bull argument by pointing out that we have ample land and that immigration is not proportional to house price growth, therefore we have a bubble.

Curiously I was doing some homework recently in prep for another move abroad and I stumbled across these facts:

Population density per square kilometer:

Sydney, 2058
Melbourne, 1566
The Randstad, 1224

The Randstad being that part of the Netherlands where 7 million people live, encompassing Amsterdam, Utrecht, Rotterdam, The Hague, and where on a daily basis traffic jams are measured in tens if not hundreds of kilometres.

When I compare the infrastructure in Sydney and Melbourne to what is available in many smaller size, less dense European cities I come to the conclusion that there may not be as much of the good life to go around Down Under. It adds an interesting angle to the supply/demand argument in any case.

 

[kincella]

Glen...only make money when you sell it ?....not entirely correct....you can make it work for you in the meantime...increase the loan to buy other assets...want to go into business by yourself...need money...banks will only be interested in lending if you have a little residential property on the side...
its amazing what a resi property can do for you
its the equity in that is attractive....and the leverage you can use ...want to borrow against it to buy shares ???? (not recommended by me) but beats all those margin loans that is bringing everyone undone at the moment....
I am not advising you to buy property, now or anytime in the future...everyone has choices....I am not here to change anyones mind about property....
associate borrowed about 50,000 ten years ago and bought shares, very happy, every so often borrows some more to buy more shares, when shares are sold the funds go back to reduce the loan...loan is secured against the resi property...last year mv of shares was 250,000 this year before the crash about 500,000.....but the loans are manageable..affordable....banks will not come after or take the shares away.....not happy with the dive in shares.. but all the risks are managable.....property worth about 750,000 with no other lending against it....original cost of house , about 250,000 many moons ago
cheers

 

[Lancelot]

I read about a bloke who sold a house at Broadbeach on the Gold Coast I can't remember the exact figures but it averaged 3% OVER about 50 yrs before inflation.
Yes RE does go up & down ..but any one who hasn't sold now will be left with a time bomb due to go off in 2009

Gotta link?

 

[wayneL]

"Buy now, or be priced out FOREVER!"
Maximus Speculatus, 240BC
Roman real estate agent​

GOLD! lol

 

[robots]

Tech, isn't this assuming that all the stars align? What if we experience deflation, as opposed to inflation for a while? What if a recession takes hold in Australia, and you lose your job - and many others do as well; would this not lower the price of the home, leaving you with a pile of debt with nothing to back it should you need to sell?

I keep questioning as to what people believe makes Australia so "special". I hate to break it, but Australia is a pretty ordinary country - A lot of people would even suggest there are better places to be, and even have intent on leaving once finishing their studies! The shock

So, again - what makes Australia so great, that it will avoid the housing slump the rest of the world has faced? Are Australian consumers not riddled with debt? Is our economy not slowing? Have house prices not soared above average levels in the last decade?

Let's see what we've got here,

• Immigration to be cut
• Slowing economy
• Rise in unemployment
• Commodity boom in tatters
• Already unaffordable prices

Aside from interest rate cuts that are perhaps too late to actually really help the economy, I honestly cannot see anything that will hold prices up?

Assuming history will always repeat can be rather dangerous, things always shift. One must always be open to the (however remote) possibility that it will not.

Sorry, but your post just seems a little "buy now, or miss out forever!" for me.

hello,

for those who dont rate Australia:

Love it or Leave it, no big deal right, planes are still going to your favorite destination

no loss

thankyou
robots

 

[Nyden]

hello,

for those who dont rate Australia:

Love it or Leave it, no big deal right, planes are still going to your favorite destination

no loss

thankyou
robots

Well, aren't you just a good little brainwashed patriotic sheep. Australia is a great country, I love living here. But, do not kid yourself - Australia is not the best country in the world. Everyone from every western country claims that theirs is the best - that's the whole idea of patriotism! Idiotic rivalry between countries, from sports, to holding onto the grudges of past wars.

Every country cannot be the best, just as every religion cannot be right (or any, for that matter) - that's kind of the point of brainwashing from a very young age though, isn't it

I've said it once, and I'll say it again - no one would want to goto war, and possibly die, for the third best country in the world, now would they?

 

[robots]

Well, aren't you just a good little brainwashed patriotic sheep. Australia is a great country, I love living here. But, do not kid yourself - Australia is not the best country in the world. Everyone from every western country claims that theirs is the best - that's the whole idea of patriotism! Idiotic rivalry between countries, from sports, to holding onto the grudges of past wars.

Every country cannot be the best, just as every religion cannot be right (or any, for that matter) - that's kind of the point of brainwashing from a very young age though, isn't it

I've said it once, and I'll say it again - no one would want to goto war, and possibly die, for the third best country in the world, now would they?

hello,

gee what a turn around: "i hate to break it, but Australia is a pretty ordinary country"

to: "Australia is a great country, i love living here"

wouldnt want you side by side in the trenches, be jumping ship

thankyou
robots

 

[Passive]

GOLD! lol

You should have listened to him. I did!

Maximus Beneficius 2009

 

[Nyden]

hello,

gee what a turn around: "i hate to break it, but Australia is a pretty ordinary country"

to: "Australia is a great country, i love living here"

wouldnt want you side by side in the trenches, be jumping ship

thankyou
robots

It is ordinary. By your opinion can ordinary not be great? Apples are pretty ordinary too, they rot, they're often flawed - but I love them.

Australia is ordinary when compared to other western countries. Some countries have more affordable housing, some have better health care, far better culture, history, and yes - even a greater (non-recession) job market.

The US, and UK are ordinary as well - that's my whole point. No country is special. I would probably love living there as well, as my needs are quite minimal.

You're darn right you wouldn't want me in the trenches. I wouldn't fight, nor die for any country. My loyalty lies to myself. I don't believe in an afterlife, so why the heck should I sacrifice my life for anything? I'd rather be branded a coward, a traitor, a deserter, heck - even be imprisoned for 10 years. At least I'd be alive

 

[Glen48]

Lancealot
Sorry don't have a link it was a letter to the Editor in the Courier Mail.
There was a story about a house sold on the G C beach and they paid some low amount for it and it sold a long time later for around a $1M some bloke worked out it had only gone up about 3% PA.
Having a house worth $$$ is no use to you unless you can use the equity tied up it the thing to make more money, buying and selling houses is ok as long as you can pick the market just like Gold, shares art work etc.
living in a $$$M house doing nothing is costing you money these days and will do for years and after the collapse it you need to hope you live long enough for it to come back to today's prices.
Is it worth the risk to sit there thinking it will keep going up when every thing associated with money is a dud.?

 

[chops_a_must]

It's an often heard remark this one, usually in response to arguments by property bulls that high property prices are a result of rising demand in response to such things as immigration. Yet its so easy to counter the bull argument by pointing out that we have ample land and that immigration is not proportional to house price growth, therefore we have a bubble.

It's probably where a bit of urban planning background comes in handy. I assume those places have better public transport than we do? Decentralised work?

There is a theory, and it seems to hold, that there are actually these quasi/ psychological limits which impose themselves on the physical limits of cities. Generally, it is thought that most people aren't prepared to live further than 30 minutes away from their main transport destination. This varies depending on the type of transport though. So if for example, they have better rail and light rail, people will be prepared to live further out.

And a quick bit of research after writing that, and it will give you the answer:

"Railways

The Randstad is the keystone of the Dutch railway network; most intercity connections terminate in one of the key cities in the Randstad. The railway network in the area is dense and heavily used."

Rapid mass transit can be used to both densify, and extend the physical limits of a city. Although in the latter case it would probably develop atypically to what we are used to.

Whenever I read this thread I remember 'Stop the Clock' who ad nauseam trotted out all the same stuff that Chops posts. I doubt that anyone would be surprised if we're all still on this forum when Chops and Stop the Clock are 95 and they're still sitting on the fence.

I can clearly remember the doom mongerers at the time I bought my first IP.
"Times are uncertain", they said. "Interest rates could go higher".
(Already 22% on IP).

"If there's a real downturn in the economy, you might not be able to get tenants".

"Tenants will give you all sorts of problems. They're all irresponsible".

Etc Etc.

Never had a single problem with a tenant, never was that place vacant, inflation pushed rents higher all the time, and the capital appreciation was excellent.

I think you are missing something in my argument Julia. I'm not talking about occupancy rates anywhere else but Perth in the context of Passive completely ignoring it as a real factor. It is a real problem in Perth property over the long term.

Also, if you have read my discussions with Agathos, I'm certainly not altogether bearish property. In fact, I think property is a fantastic investment. If you can time it well enough or near enough, you can effectively have an almost risk free passive income stream. I'd take that on a call writing strategy any day of the week.

It is also not clear cut, because I think there are some great deals in property starting to appear here in Perth, if you have the ability to get in position:

http://www.bigfooty.com/forum/showthread.php?t=528606

Going back to the Agathos discussion Julia, I have my areas where I am long term bullish, and long term comparatively flat. I'm not exactly sure how you can see me sitting on the fence there. If I see a deal that makes sense in one of these areas, I'll do it when I can. No two ways about it. Like I've said over and over again, the Beacy strip through Hammy Hill and maybe Coolbellup is where I will be looking because of its proximity to Freo, and development potential.

But there is probably another issue that needs to be looked which I will do with Tech's post.

Mooorrrning.

No hangover (I don't drink but so tiered need to get to bed!).

Some thoughts for 2009.
After recession and in worst cases depression there always follows---inflation and in some cases hyperinflation.

If you don't have property then---you'll likely never have it.
You'll all get your wish and rent for the rest of your lives as will your kids and their kids.
Cash will mean nothing as it is eroded by inflation.
That $300,000 home will become impossible to own as it will race away in price as your deposit becomes less and less in value.

You must have at least 1 home to keep in touch with inflationary trends.

Yeah... I don't agree. You may just as well buy gold.

If inflation pushes rents up, but wages apparently stay the same so they can't afford said inflating property, there will come a point where rent will intersect total earnings. People will just stop working, and society will cease to function. It just isn't a logical argument.

I'd hypothesise that if we did get some kind of inflation - personally... I think a Japan scenario is a much greater probability than hyperinflation - property would actually inflate at less than the inflation rate. After all, it seems to have been property that was one of the main pushes behind our inflation.
Interest rates wont sit at 30 yr lows for another 30 yrs.
Those that have "ridiculous" loans will be laughing as they(The loans) diminish into in significance as inflation races away.

Chops
Everyone can develop even those without a home of their own.
Even with very little capital base.
All you need is holding and preliminary cost capital.
This can be found with JV partners if you have a good development with excellent numbers.

This is true. But I'm also wary of doing these sorts of deals. It is a distinct possibility with the brother and the contacts in the future.

It is also a reason why I would be prepared to pay quite a bit more for developable land. Subdivide, live in one and sell the other. I know quite a lot of people do this, but I don't understand why more don't.

I'm sorry for giving you some heat over the last day or two. I apologise for that considering your circumstances at the moment.

Another thing I want to point out, as I mentioned above. In relation to running battles on this thread between the "haves" and the "have nots". Maybe it should be italicised or bolded or something.

There is a big problem with those who already have property, not understanding the nature of property investing. Not in a bad way, but from the perspective of not being in the market. Typical property investing is not generally something you take on for a short time. In a lot of cases it is essentially a permanent investment. Therefore, entry is everything.

If you have got in at a good time, for one reason or another, generally, you are set. You are running. As long as you aren't stupid, outside influences are generally irrelevant. For those not in the market, that's not the case. Get in at a bad time, it can set you back 5-10 years maybe.

So there is this rather large disconnect between the two viewing points of the groups. The owners on here, seem to have done very well for themselves, and so long as they haven't been stupid, so long as they have invested wisely, a lot of what is happening is just noise. They are past the point of having to worry about the factors that may or may not inhibit them to begin with.

For the rest, it is a matter of, if they so wish, to be able to get into that position where it really doesn't matter if houses go down 10-20%, so long as they are getting a return. And it seems most are. But the fact that the two groups are looking at, and have completely different parameters to work with, within the same asset class, means there is a whole heap of misunderstanding. And I don't think that that is something that can't be overcome.

hello,

but chops, prawn, NC and others are doing well man as they saving hard, putting it away

thats the game rent and invest nothing wrong with that, people will do well

thankyou
robots

See, Robi gets it.

Nawww... I love you Robi. :

 

[kincella]

chops...seems you are in WA so not familiar with other city limits....Melb has this 2030 vision plan that they have been playing with since about 2000....they..the govt.. will not open up or release any new land for subdivision...tight controls on the land...regardless of what the citizens want or demand or need....we are limited to the land that has been designated years ago....the govt. suggests we deal with the shortage by allowing developers to do multi dwellings...aka units...high rise etc on the current land...which basically means they have to find a existing house, demolish it and build high rise...
then there is the Urban Land Authority...another govt dept, charged with release of land outside our boundary...eg like building another suburb out west somewhere....their land release is so small...people camp out for days in advance in order to get a parcel of land of their choice...its auctioned, fuels demand...
Sydney is similar, with restrictions....think it was late October on the news, the kids packed a tent and waited a week for that land authority to auction land on site....think it was the first land in over a year or was it 2 years
to come onto the market......

Maybe all you WA people do not have that problem over there...or if it were applicable , you are not aware of it....

Even in the regional city on the nsw border that I follow....land for housing is only released once a year or sometimes you wait 2 years...the adjoining city is the same....so if you think you just willy nilly go out and buy land to build a house...you need to think again.....in that case its only 100 blocks..so thats only 100 new houses available....and its not in town..its out on the edge...or further out where the town planners suggest a whole new suburb for the future...but the first ones are the guinea pigs....nothing there to begin with

so when you all go on about what shortage, there is none etc...how big australia is and how much land is available.....you are being rather short on the facts......most of australia is not suitable for housing....most of it is desert, no roads water or anything...and today a lot of it is locked up by the natives....you cannot travel haphazardly over the country with your tent as they did years ago...you are confronted with shotguns and no permission to travel onto native land...
oh and I forgot to add...about 1/3rd of Vic has been taken over by Parks and Gardens Vic....it is locked up...they do no maintenance on it, no fire prevention, no bush fire tracks...and god help the famers and neighbours whose properties border the parks.....explains why the past 5 or more years we have had massive fires in east victoria.....nsw has a similar problem

 

[chops_a_must]

Well... Perth is really really pushing its physical limits as well.

I'm reasonably well versed on the 2030 vision as a few of my lecturers worked on it... and aren't all that happy with it.

It would be fine so long as they would be forthcoming and meeting the timetable in regards to public transport, and some badly needed cross directional train lines.


If you are able to comprehend what I said to ASX Kincella, you would know I'm not being antagonistic towards the limited land supply conundrum. It's good to see you are just as annoying here as you were on HC on the VRE or INL threads I was down ramping at the time.

Like I said, cities have practical physical limits, regardless of policy generally.

In WA, a lot depends on the council locality you are in. You have some completely anal retentive councils like Melville, where I'm living at the moment which have some seriously dick brained regulations which would not help investors.

And in Victoria, the 2030 planning is needed specifically in relation to one massive problem you will face in the future, energy.

 

[kincella]

chops....I am just as annoying...why is that...stating facts about a subject ??? and how am I supposed to know what you said to the asx ...I have no idea who you are...or what was said or when etc....and if I can comprehend ???? who are you to question my understanding of a subject....

I prefer not to insult people or question their intelligence etc...but some people come out fighting...being argumentive...
difficult to deal with...just for the sake of it, it seems....
so i hit the ignore button....

 

[Beej]

Living in a $$$M house doing nothing is costing you money these days and will do for years and after the collapse it you need to hope you live long enough for it to come back to today's prices.

Rubbish! You are forgetting about the rent you would otherwise be paying, with after tax $$$..... The house I live in would rent out for at least $1200/week - so it actually "earns" me ~$60k pa after tax regardless of any potential capital appreciation, or other use that I might put the equity in it towards. Another way to look at it is the money tied up in my house provides my family with a $60k (after tax) a year lifestyle, in addition to all the other benefits mentioned by previous posts (equity etc).

Oh and PS, there will be no "collapse" so your entire point is both wrong, and moot.

If inflation pushes rents up, but wages apparently stay the same so they can't afford said inflating property, there will come a point where rent will intersect total earnings. People will just stop working, and society will cease to function. It just isn't a logical argument.

You haven't lived/worked through a higher inflation environment yet have you? I remember the 10%pa inflation days of the mid/late 80s well - usually wages rise quite fast and in line with inflation, so the argument about rent not being able to increase doesn't hold water. What inflation primarily does is devalue any cash you are currently holding at a rapid rate due to the ravages of taxation on cash earnings coupled with the price inflation of other assets like property. Otherwise you raise some good points in those last couple of posts!

Beej

 

[chops_a_must]

chops....I am just as annoying...why is that...stating facts about a subject ??? and how am I supposed to know what you said to the asx ...I have no idea who you are...or what was said or when etc....and if I can comprehend ???? who are you to question my understanding of a subject....

It was in the post you were responding too...

 

[tech/a]

After all, it seems to have been property that was one of the main pushes behind our inflation.

Property prices were to some degree a consequence of inflation.

Increased Commodity prices.
Oil Gas,Food.
Increase in the AUD
Pretty well zero unemployment.
Easy credit.
Rising interest rates.

Were major contributors to infaltion.

 

[Passive]

Chops

Your post has given a pretty good indication of where you are placed and I must admit I had no illusion it was otherwise. I grant you that you are not totally onesided against real estate per se and thats refreshing, but please don't think we all bulls are either.

There is no way Perth is finished by a long chalk in the long term and its a fallacy to believe more people will be able to afford to buy and subdivide. Usually these blocks are not cheap for first time entrants and many are landbanked as it were by the wealthier. After you factor in the costs of development, nonsense with councils easier to buy where you can afford - so feel most FHB.

Will Perth depopulate - not likely - long term it will remain a growth point. Did we overbuild last boom - yes - but what happened here was a wave of investing that became trendy - now a lot of firstimers are offloading. Not many empty houses though -just a redistribution of ownership.

You are good on theory as your lecturers are - however reality has a habit of bypassing these folk. Perth develops into the suburbs - then the infrastructure follows. Merriwa, Quinns, Mindarie were infrastructure less, years behind, now infrastructure - 15 years later in place. Ellenbrook/Aveley/the Vines/Henley Brook 30-40 mins away same problem. No infrastructure - people love living there . Neat suburbs etc but eventually politics demands new roads/trainlines etc develop. Midland now caters for employment there as does Joondalup in the North. Also Flynn Rd industrial site near Joondalup will have a larger commercial area than Canningvale and is growing at the rate of knots. Fremantle will become more touristy and Henderson etc are the areas that will remain industrial etc.

We all faced the almost impossible dilemma to get in. We got in by going to the periphery and then worked in. Why is it any different today?

Analogies to Japan are just a nonsense as they have a totally different approach to real estate , mature society that has made some real mistakes with their protectionist and unwieldy banking system.

We will have inflation , count on it, we will have people flocking here, Perth will grow long term and it is still a growing state with huge future potential.

Now I have two assignments for you

1. Pick this post apart sentence by sentence in your usual satisfied manner
2. Ask your lecturers where they have done their real estate investing

And when you have done that go and ask Luigi who owns half of Spearwood and surrounds, and the other migrants how they built their wealth? Sure as hell was not by listening to academia. For the record I majored in economics and was the largest amount of horse.... I have ever come across.

 

[chops_a_must]

Yeah...

One of them will probably own a fair bit of the North Quay Island. You were saying? They have also over the last 30 years or so, acquired a tonne of property actually in Freo. I don't think you would get very far being in the urban planning world without knowing where the best property is and will be.

The place I am living in now, is just shy of being sub dividable. Probably will be able to be eventually. Worth between 330-400. But it is Melville council... so the anal retentive comment and your comment go some way to explaining that.

The landbanking issue is one I've spoken to Tech about in PM's. Far from being exclusionary for me, it may be a bonus. The reality is I will likely pool with the brother to get anything done.

I have enough for a deposit, for anything I deem suitable. But being self employed, working a lot of cash in hand and doing the records to minimise tax completely is not exactly conducive to getting finance... That's probably 12-24 months away for me.

Another problem property investors here now have is the Libs. No money for infrastructure. No value adding to the community. Almost the exact same circumstances we had the last time they were in power and we had emigration problems.