House prices to keep rising for years

[robots]

Your maths is a little out Im sorry to say.

$20 x 40hrs/week x 52 weeks a year is only $41.6K.
Thats a big difference to $50K/yr.

That example in itself highlights that not everyone earns the "average" income.

Anyway..back to housing, we'll just keep saving
Hard work will get us there

hello,

thats the way to go man, put the direct debits or weekly savings in place and presto the $ are piling up large

as 1yr, 2yrs, 5yrs disappear quick as you will be laughing and be able to get yourself a place

have a family, play driveway cricket, do a few bomb's in the swimming pool

and take whatever comes along brother

thankyou
associate professor robots

 

[robots]

hello,

great article here:

http://onthehouse.yahoo.com.au/index.htm?Action=news_article&ArticleId=15

they all apply for the buyer as well

thankyou
associate professor robots

 

[MACCA350]

Your maths is a little out Im sorry to say.

$20 x 40hrs/week x 52 weeks a year is only $41.6K.
Thats a big difference to $50K/yr.

That example in itself highlights that not everyone earns the "average" income.

Anyway..back to housing, we'll just keep saving
Hard work will get us there

And for the normal 38 hour week:
$20 x 38hrs/week x 52 weeks a year is only $39.5K.
That's an even bigger difference to $50K/yr.

cheers

 

[satanoperca]

A good article Robots but I did like

“If prices remain the same for eight years, after inflation and economic growth you would see that the real decline in price is 40 per cent,” says Rismark International economist Dr Matthew Hardman.

40% decline, I have heard that somewhere before. Japan maybe, no someone called S.Keen a professor much like yourself Robots.

Cheers

 

[robots]

hello,

just putting up articles for discussion,

personally i dont believe in inflation and it is the last hope for many, like fantasy island

"real" "real terms" "real decline"

inflation is a non event, its a given like the sun coming up in the morning

"if"

thankyou
associate professor robots

 

[Beej]

Well, interesting analysis from the RBA pretty much blows many of the income multiple house price arguments bandied around out of the water:

From: http://www.smh.com.au/national/home...better-than-five-years-ago-20090519-bear.html

A TYPICAL home is worth a little over four times the average household's annual after-tax income, down from almost six times five years ago, Reserve Bank figures show.

Strong growth in incomes and a period of more sluggish median house price growth are working in the interests of would-be home buyers. "This is a dramatically better picture on Australia's housing affordability," the chief economist at UBS, Scott Haslem, said.

By using household income as the measure (rather than a single average full time wage as many with bearish views attempt to do), you get a much more accurate picture of house prices and affordability, and that's without accounting for prevailing interest rates, which of course vary.

The article also goes on to state that in the 80s the household income to house price ratio was about 3x, however, I would expect that to be the case because a) the 80s (up until the 88 boom) were a period of little house price growth, and b) was a period of very high interest rates and inflation; a very different economic situation than we see today. It also points out that *some* countries still have a lower ratio using this measure than AU, but again I say that's expected due to our higher levels of urbanisation, different taxation regimes, supply constraints in urban area's and the fact we haven;t suffered a systemic banking crisis as some of those countries just have.

Anyway, the views and data presented by the RBA there pretty much sum up my views on how the housing market in AU operates, and how periods of very high price growth are "deflated" slowly in real terms rather than precipitously via inflation based and real wages growth, increased building/supply of affordable housing plus inevitable government subsidy (which is nothing new here and been going on since the 60s at least). I think the early 2000s "bubble" has pretty much deflated by now already, as shown by these figures, and with monetary policy settings at the current levels the market is setting itself up slowly for the next boom, which will really get going 2-3 years out the back of the current economic downturn. There will be no great crash in prices from here.

I'm not investing any more in property just yet though, as I think for an IP there is still time to wait, with there likely to be more cash-flow positive opportunities arising as rents continue to slowly rise in some area's over the next 2 years. IMO Currently equities are looking to be more attractive over-all for the next 1-2 years for potential growth. If I was looking to buy a PPOR though it would be a different story, as there is the need to account for all the rent payed in the meantime as well, plus the lifestyle/life-stage/security trade-offs etc, and what becomes available in the desired/target area in question. Interesting times!

Cheers,

Beej

 

[kincella]

another little gem from today....
extract................
Treasury's growth forecasts drew support yesterday from Reserve Bank governor Glenn Stevens. He told a business breakfast in Sydney that Treasury's forecasts were almost identical to the bank's for the next two years, while beyond that, there had always been a period of above-average growth following previous recessions.
"I don't think it is crazily optimistic to expect that will occur at some stage," he said, adding that it was hard to be precise about the timing.

The Reserve Bank is increasingly confident that China's economy is recovering, with the March quarter displaying the strongest growth for nine months, although Mr Stevens said it was too early to tell how durable its recovery would be.

Mr Stevens said there was a chance Australia would stage a much speedier recovery than anyone was expecting
http://www.theaustralian.news.com.au/story/0,25197,25509893-601,00.html

ps...I am a bit embarrassed about the wrong figures yesterday, I usually proof read my posts...but not that one...thanks to all who pounced on it

obviously a bit stressed yesterday...waiting for an electician and a plumber to fix things in the kitchen....and trying to finalise a job to meet a deadline..
the error stood out like a 'sore thumb'.... I was trying to point out, just how easy it is to earn $50,000 pa on a low hourly rate....and in most jobs there is opportunity for overtime etc.....and one does not need to be a professor to earn what is described as the median wage...or an average wage
it should have read 25 ph x 40 = 1000 pw or 50,000 pa

 

[dhukka]

another little gem from today....
extract................
Treasury's growth forecasts drew support yesterday from Reserve Bank governor Glenn Stevens. He told a business breakfast in Sydney that Treasury's forecasts were almost identical to the bank's for the next two years, while beyond that, there had always been a period of above-average growth following previous recessions.
"I don't think it is crazily optimistic to expect that will occur at some stage," he said, adding that it was hard to be precise about the timing.

The Reserve Bank is increasingly confident that China's economy is recovering, with the March quarter displaying the strongest growth for nine months, although Mr Stevens said it was too early to tell how durable its recovery would be.

Mr Stevens said there was a chance Australia would stage a much speedier recovery than anyone was expecting
http://www.theaustralian.news.com.au/story/0,25197,25509893-601,00.html

Why do you guys consistently cite the RBA as a source of authority on economic matters when their track record clearly demonstrates they have no credibility? This is the same institution that was raising interest rates and bleating on about inflation whilst the world was in the grips of a deflationary debt crisis. Their forecasts have been consistently too rosy, they have only just joined the recession call in the last couple of months. The only agency with a worse track record of economic forecasts is the Treasury and now the RBA is agreeing with them. Seriously, you can't make this stuff up.

 

[kincella]

dhukka....you are right...what the hell was I thinking....another alzheimers moment
oh well, it was my thoughts as well...I still believe the economy will recover before most wake up...
since it has not been a bed of roses the past two years...but woeful....it must come to an end soon.

 

[MACCA350]

The RBA must be smoking weed if they honestly think we are currently at 4x ...........and remember they stated AFTER TAX

Just to balance things up, here's the 5th Annual Demographia International Housing Affordability Survey: 2009 Ratings for Metropolitan Markets where the Sunshine Coast took out number 1 spot for the most Severely Unaffordable at 9.6x

Affordability Improves: There are 87 “affordable” markets, all in the United States (77) and Canada (10). As in 2007, the “affordable markets” include the three markets above 5,000,000 population with the greatest demand, Atlanta, Dallas-Fort Worth and Houston. A number of additional major markets (markets with more than 1,000,000 residents) in the United States are “affordable,” while Winnipeg is Canada’s largest “affordable” market (Table ES-2).

“Severely Unaffordable” Markets Remain: The least affordable markets are generally in Australia, Canada’s province of British Columbia, New Zealand, the United Kingdom and California (Table ES-3). However, many of these severely unaffordable markets have experienced steep price declines in the last year. Among the major markets, Vancouver is the least affordable, with a Median Multiple of 8.3, followed by Sydney (8.3), San Francisco (8.0), San Jose (7.2), Adelaide (7.1), Melbourne (7.1) New York (7.0) and London (6.9).

Sydney, Melbourne and Adelaide more unaffordable than New York!

cheers

 

[Beej]

The RBA must be smoking weed if they honestly think we are currently at 4x ...........and remember they stated AFTER TAX

Just to balance things up, here's the 5th Annual Demographia International Housing Affordability Survey: 2009 Ratings for Metropolitan Markets where the Sunshine Coast took out number 1 spot for the most Severely Unaffordable at 9.6x

Sydney, Melbourne and Adelaide more unaffordable than New York!

cheers

If you are going to criticise RBA stats and analysis, then trying to use a complete load of rubbish like the Demographia report is even longer stretch of the bow!

Think about it - why is the Sunshine Coats so unaffordable by their measure? Is it REALLY that expensive up there? More expensive than Sydney, New York, London etc etc??? I don't think so, not in a million years. So why does that report rate it that way?

The reason is it used the LOCAL average wage as the measure.... that is just dumb. Area's like the Sunshine coast, Byron Bay etc etc have LOADS OF WEALTHY FORMER CITY DWELLING RETIREE'S! Duh! Ie and many of them earn very low incomes (self funded pensions etc), but they have loads of assets..... hence house prices are high because rich retiree's push the prices up, but that doesn't make it unaffordable (for the people buying anyway!).

So no, all the dole bludgers and minimum wage earning unskilled losers who may have been born and bred in area's like that in the past (and keep the average earnings stats low as well!) can't afford a "average" house for the area there anymore - no way, but nor should they expect to! The area has had it's natural benefits improved on by investment of large amounts of $$$ by businesses and developers etc - ie by others in order to make the lifestyle there attractive to tourists and wealthy retiree's - so area's change, and people have to deal with it. What's more stats like that certainly don't imply any likelihood of a reversal of those social-demographic changes anytime soon either.....

See here for a comprehensive debunking by Chris Joye of the massively flawed Demographia report:
http://www.businessspectator.com.au...se-price-gloom-$pd20090129-NR2AR?opendocument


Oh and PS: I lived in the US for a while, and did some time in New York - anyone seriously trying to argue that housing is more affordable on New York than in ANY Australian city has boulders in their head. Most New Yorkers who are not Wall St bankers struggle to even pay the rent on a studio apartment, let alone even contemplate being able to buy when the entry price for a 2 bedroom apartment is not that far below the US$1M mark anywhere on Manhattan island. Same goes for London, Paris, San Francisco etc etc - they are all REALLY expensive places if you want to buy property, or even rent - in fact ESPECIALLY if renting, compared to anywhere in Australia.

Cheers,

Beej

 

[GumbyLearner]

So no, all the dole bludgers and minimum wage earning unskilled losers who may have been born and bred in area's like that in the past (and keep the average earnings stats low as well!) can't afford a "average" house for the area there anymore - no way, but nor should they expect to!

Wow. I'm one of them and I'll take that as a compliment.

My only advice to you is not to rent out a property. After all it's a people business.

 

[Beej]

Wow. I'm one of them and I'll take that as a compliment.

My only advice to you is not to rent out a property. After all it's a people business.

You have no skills at all? Really? You intend to earn minimum wage for the rest of your working life?? No ambition to improve your relative standing in society, level of education etc at all? If the answer to those questions are all yes, then you do fit into the broad generalisation I have made, and really you cannot expect to ever be able to own property. But I suspect that you would NOT answer yes to those questions, otherwise I don't think you would be hanging around a forum like ASF learning lot's of interesting stuff.....

And PS: Re renting out IPs - that why I employ R/E agents for that

EDIT: On minimum wage etc - I too earned minimum wage once long ago when I was in high school and uni in various part time jobs I took on, so nothing wrong with that under such circumstances. However, once uni was finished I started work at about the national average full time wage at 22 - so already benefiting from a good education. I set 3 goals for myself at that time. 1) was to do some significant world travel before I was 30, 2) was to be earning 3 x what was then the average wage within 5 years, and 3) was to buy a house and have it paid off before I was 30. Earnings only went up from there, and I achieved all 3 goals comfortably. I think there's something in that for everyone!

Cheers,

Beej

 

[kincella]

Its just like hard work...trying to extract the truth from the fiction on this topic.....loads of theories here...without the substance
try asking people who are out there hunting for a house....or looking to rent...to get the real picture

somewhere on this site today, joyous about property prices falling less than 1%...see this link where the ASX fell 31% yoy and LPT's lost 58%....
so to compare 1% to 31%....what the .....(insert your choice of word here)

http://www.rpdata.com/news/rp/20090430_media.html

 

[Go Nuke]

So no, all the dole bludgers and minimum wage earning unskilled losers who may have been born and bred in area's like that in the past (and keep the average earnings stats low as well!) can't afford a "average" house

What an ignorant statement.

However, once uni was finished I started work at about the national average full time wage at 22 - so already benefiting from a good education. I set 3 goals for myself at that time. 1) was to do some significant world travel before I was 30, 2) was to be earning 3 x what was then the average wage within 5 years, and 3) was to buy a house and have it paid off before I was 30.

Not everyone is like you Beej.
Its people like you who are ignorant and insensitive to those who are'nt as well off as yourself.
Sure I admit if someone wants to bludge on the dole, then I have no sympathy for them either if they cant afford a house. But I know plenty of people who work their butts off in blue collar jobs and will never acheive what you have...and its not because they are lazy!

I now remember why I avoided this thread for so long, because it was so full of some well off nobs with their heads in the clouds as to how a large proportion of hard working Australians live.

Some of you have no idea about average wages...honestly.

 

[Beej]

What an ignorant statement.



Not everyone is like you Beej.
Its people like you who are ignorant and insensitive to those who are'nt as well off as yourself.
Sure I admit if someone wants to bludge on the dole, then I have no sympathy for them either if they cant afford a house. But I know plenty of people who work their butts off in blue collar jobs and will never acheive what you have...and its not because they are lazy!

I now remember why I avoided this thread for so long, because it was so full of some well off nobs with their heads in the clouds as to how a large proportion of hard working Australians live.

Some of you have no idea about average wages...honestly.

Come on - people who work hard in blue collar jobs can earn a LOT more than the MINIMUM wage, which is what we are discussing, not the AVERAGE wage.... I am not deriding blue collar workers at all, far from it! (Many blue collar jobs require significant skills/training as well). All I am saying is if all you expect from life is a minimum wage for your whole life, well, you are consigning yourself to the bottom rungs of society, and property ownership is not common on those rungs.....it's a privilege not a right.

I would hope that my own experiences would potentially be a source of inspiration for others, rather than a source of jealousy or resentment. Ultimately it is a competitive game we are all in here called life.....

Cheers,

Beej

 

[satanoperca]

hello,

good evening and hope everyone having a fine day

please just relax, its only debate and discussion with the money box crew getting all excited yesterday

having been away from the computer and when i logged on just now i have 378 pm's requesting those sites again, so here they are:

rpdata.com.au

apmpropertydata.com.au

thankyou
robots

Here is a link for the 1st qtr 09 from Robots mates @ APM.

Houses national +0.1%
Units national +0.5%

YoY figures all negative.

http://www.homepriceguide.com.au/media_release/APM_HousePriceSeries_MarchQ09.pdf

And why shouldn't RE go up for the quarter :

Lowest IR's in 40 years
Low unemployment levels

I cannot understand why it did not show greater growth unless the market was already overcooked, but the bulls keep presenting facts that showed it wasn't inflated.

Cheers

 

[MACCA350]

So how does the RBA get it's 4x figure?
If we use the Melbourne REIV Median of $410k, then the RBA believes the average AFTER TAX household income is over $100k.............dunno about you, but that's a load of BS.

BTW I did notice in the link Beej provided there was a graph that also showed Australia as unaffordable by comparison, so while there may be a dispute about the methods they still both showed Australia as being one of the most unaffordable countries.

cheers

 

[kincella]

sounds like a violin required

 

[GumbyLearner]

Come on - people who work hard in blue collar jobs can earn a LOT more than the MINIMUM wage, which is what we are discussing, not the AVERAGE wage.... I am not deriding blue collar workers at all, far from it! (Many blue collar jobs require significant skills/training as well). All I am saying is if all you expect from life is a minimum wage for your whole life, well, you are consigning yourself to the bottom rungs of society, and property ownership is not common on those rungs.....it's a privilege not a right.

I would hope that my own experiences would potentially be a source of inspiration for others, rather than a source of jealousy or resentment. Ultimately it is a competitive game we are all in here called life.....

Cheers,

Beej

The point I made was with regard to renting property.

You can have all the education in the world and also be successful in life endeavours without holding an attitude that minimum wage earners are LOSERS.

I don't think this attitude would endear any potential leasee to honour a lease agreement. After all, you would want them to pay on time and not break a lease right? Leases are mutually beneficial to both parties.

Just thought I'd share a little wisdom and reality to the attitude you presented on the thread.

Also, since you use an Agent I would also ensure that they are a down-to-earth and amicable kind of character. You certainly wouldn't want someone conducting your affairs with a similar kind of attitude. Real Estate is a people business.