House prices to keep rising for years

[MACCA350]

It's been stated that house prices double about every 7-10 years.
Looking at wages I'm taking a stab at them doubling every 15-20 years.

You can't tell me that is sustainable, yes interest rate drops have countered some of that difference recently but with the cash rate at 3% any further drop will have little effect and cannot counter the above conditions if they continue

What about in 40 years(when my grandchildren will be buying houses)? Say we use these average numbers as an example

2009
house 450k
income 50k

2019
house 900k
income 75k

2029
house 1.8M
income 100k

2039
house 3.6M
income 150k

2049
house 7.2M
income 200k

Try paying off $7.2M with a $200k income in 30years

A few things could happen:
1 house prices don't keep doubling every 10 years and instead increase at a sustainable rate in comparison to income
2 incomes increase to match the rate of house prices
3 housing prices crash and return to a sustainable growth rate
4 housing becomes the domain of the rich 0.1% of income earners and everyone else gets stuck in government built high-rise flats.......Judge Dredd style(ok maybe 100years down the track )
5 dunno, haven't thought of one yet...........anyone else have a 5th

cheers

 

[Beej]

It's been stated that house prices double about every 7-10 years.
Looking at wages I'm taking a stab at them doubling every 15-20 years.

......

Of course that would be unsustainable! Personally, I've never believed the all houses double every 7-10 years thing anyway; I think in the past house prices have, on occasion, doubled every 7-10 years, but not always, and a lot of that increase has been pure inflation in the past. Your wage doubling figures are of course based on the past decade or so which have had very low inflation - in the 70s/80s it was common for wages to double within 10 years or less by the way - and no surprises that house prices went up *back then* just as fast or faster.

My first PPOR went up by maybe 60% in 7 years (92-99), and my 2nd house did double in 9 years (99-08), but I renovated it to achieve that so put extra capital in along the way, plus that period included the big boom years. I think the next 10 years will see much more moderate house price growth, but growth none-the-less.

Cheers,

Beej

 

[MACCA350]

Just realised I didn't compound the income figures 2049 should have ended up as 253k

cheers

 

[robots]

hello,

there's no issue out there in the property world, nothing broken

so everything okay,

hey hey hey:

http://www.theage.com.au/national/house-prices-surge-at-top-end-20090729-e1k8.html

amazing, what a place in time for Australians

with many claiming an event worse than the 1929 depression and houses/units still going strong, utopia brothers

if you see some stooge in the office today let them know

walkin' tall,

thankyou
professor robots

 

[robots]

hello,

special word out to:

Numbercruncher
Pepperoni
Chops
financial advisor guy
Numbercruncher
Xao
Kimosabi
Numbercruncher

enjoy the day brothers if you are reading, i think the internet in the UK has just gone down

looking forward to get my slab and lunch on sunday

thankyou
professor robots

 

[tech/a]

Time to change subjects...

Reasons.

a) limited supply and increasing demand (immigration)

b) increasing building costs of new homes ripples through to all housing

c) increasing minimum expectations (McMansions)

d) increasing wealth trickling down from mining boom

e) increasing cost of capital (interest rates)

f) increasing wage pressure


The increased building costs are due to:-

1) skilled labour shortages (tradies)
2) increasing OHS requirements
3) increasing environmental standards
4) inflation based increases in building materials
5) increasing compliance requirements on builders

And thats before we start discussing land prices, let alone the dramatic wages currently available to ordinary people who are willing to work in unpleasant places for a while and save big deposits. Nor have I factored in a shift from the stock market back to housing (which I suspect will only be transient).

I can't see a lot of these things reversing all together. It seems to me that those who are hoping for a collapse in house prices are really up against it. It may well be that ownership of property will define the wealthy and the poor, and perhaps eventually require legislation to redistribute the wealth (like the UK did with its death duties to force heirs to sell the family castle etc). But that is a long time away; endless cheap land is the historic reason why every Australian expected his own backyard, but those days are disappearing fast and the owners of land are getting wealthier and wealthier.

And rents will go up up up up...

Thats my theory anyway...

Moses How many did you end up buying?

 

[kincella]

my 2 cents worth again....
Mofra said "Instead of can I get a desired result, ask how can I get a desired result."

When I set out my plan to achieve my goals, an important part was to double my salary, or income every 5 years, for the next 20 years. How I achieved my goal was through further study, and experience. I did change employers to achieve my goals, then eventually became self employed.
I achieved my goals, and doubled my income every 5 years. Makes a huge difference when contemplating other achievements on the list of things to do.

Not all, or every property will double over a ten year period. So you dont have to worry too much. Some will go higher and some will not. Try using an increase of 30% or 3%pa over 10 years, just keeping in line with inflation is a better guide.

Macca...just wondering, you keep using the one wage in your estimates, rather than the normal of 2 wages, and you dont sound like you are convinced that buying a house is good for you. ??? Are you feeling pressure to buy ? Why not stay renting if you are more comfortable with that strategy.
Oh and your figures are all wrong, in so far as, a bank will not lend 450k's on an income of 50k's...they would need closer to an income of 80-100k's
or would lend only 200k's or less on an income of 50k's

 

[MACCA350]

Macca...just wondering, you keep using the one wage in your estimates, rather than the normal of 2 wages, and you dont sound like you are convinced that buying a house is good for you. ??? Are you feeling pressure to buy ? Why not stay renting if you are more comfortable with that strategy.

I use one wage because I believe we shouldn't need 2 wages to service a house loan, I realise that's become unrealistic for most over the last 10years or so. Not a problem for us though, we're buying with cash.
Buying a house is good for us, we've spent about a year looking for the right one for us............but I do feel pressure, but mostly from the Mrs

Oh and your figures are all wrong, in so far as, a bank will not lend 450k's on an income of 50k's...they would need closer to an income of 80-100k's
or would lend only 200k's or less on an income of 50k's

That's irrelevant to the point of my example.

 

[kincella]

funny about that, here you have been 'going on' about the high cost of housing, how unaffordable it is, you posted the figures yesterday using the one wage theory and prices doubling etc....
but today that is irrelevant..........the fact that on a single low wage one could not get a loan, and further to that, they would never be able to save up to pay cash either
and now today, you are buying a house for cash (well what else would you use...gold ?) so we are to assume you dont need a mortgage and can live on one income....
well you are not the ordinary average bloke, who does require a mortgage and two incomes to support it....

on another forum about 2 years ago, this bloke came on saying he earnt 50k pa, had a spouse at home and one child....whinged how could he ever pay off a 450k loan.....and why should the wife go to work etc...but demanded he was entitled to the median house value for a home here...
then about 6 months later, he was bragging, that he had paid cash for a million dollar house in Darwin........
who knows what to believe of some posters....

 

[MACCA350]

funny about that, here you have been 'going on' about the high cost of housing, how unaffordable it is, you posted the figures yesterday using the one wage theory and prices doubling etc....
but today that is irrelevant..........

My point was to illustrate what happens if house prices double every 10years as has been suggested so many times and wages double every 20years

the fact that on a single low wage one could not get a loan, and further to that, they would never be able to save up to pay cash either

Yes and my point was if things continue as they have it will get worse. I gave some possible consequences, do you have an opinion on which would happen or have any other possible outcomes?

and now today, you are buying a house for cash (well what else would you use...gold ?) so we are to assume you dont need a mortgage and can live on one income....

I personally don't call credit cash, apologise if it caused confusion

well you are not the ordinary average bloke, who does require a mortgage and two incomes to support it....

Agreed, but it is irrelevant to my opinion on the state of our housing market

on another forum about 2 years ago, this bloke came on saying he earnt 50k pa, had a spouse at home and one child....whinged how could he ever pay off a 450k loan.....and why should the wife go to work etc...but demanded he was entitled to the median house value for a home here...
then about 6 months later, he was bragging, that he had paid cash for a million dollar house in Darwin........
who knows what to believe of some posters....

Fair enough.

cheers

 

[gfresh]

Building approvals out, showing further gains..

http://www.abs.gov.au/ausstats/abs@.nsf/mf/8731.0?OpenDocument

Quick chart.. VIC never really suffered much of a downturn.. QLD coming off it's low base.. not much happening in NSW to address supply:

 

[kincella]

another friend, bought Sep 04 outer eastern suburbs Melb for 240k, borrowed 200k's, mv now almost 5 years later 450....almost doubled (the market was flat back to zero at that time) so she bought low, and fixed a low rate for 5 years of under 7%....paid extra capital off the loan, the loan balance now 130k's, looking to buy a bigger house for 600k's....so now has 320 k's cash (started with 40, paid about 50k's interest, put in another 70 capital)
buy next house (upgrading) say 600k, less 320 deposit, borrows 280...she will probably get a fixed loan around 5.5 or 15400 interest pa.....
so the new loan is only 80k's higher than the original, and she is earning a stack more money than 5 years ago....
was she just lucky, prudent, smart...and now that will be their home for the next 20 years, while they are nesting......

extract...........

First-home buyers willing to live in outer suburbs
Stevens spoke of the importance for economic recovery of increasing the nation's housing stock, Mr Salt said there was strong demand for cheap housing on the city fringes, The Australian reports.

But property analysts said government fees and charges on new housing developments were an impediment to supply.

"Migration figures out this week show Australia's population is still growing at record rates, and these people must live somewhere. They go to the most affordable areas, and the fastest growing area at the moment is Melbourne's western front - places like Werribee, where you can still pick up a house and land package for less than $260,000," Mr Salt said.

http://www.news.com.au/business/money/story/0,28323,25856091-5013951,00.html

 

[Mofra]

Would be fairer to somehow filter these from the owner occupied properties.

Impossible so just exclude it from the entire residential sector.

Watch the market flooded with places for FHB's to live in then

Political reality dictates that this is an unlikely scenario. As one politician said not long ago, rising house prices = happy voters. K Rudd has shown he's more than happy to keep splurging cash if it makes him popular with the rank & file; judging by the recent polls, it's working.

 

[kincella]

this from Morrel and Koren...the buyers advocates........
so lets forget about graphs....it may have more to do with people sick of the stockmarket, and lack of supply of good quality housing on the market....

an extract.......................
If you were looking for evidence of the strength of the market, you could have spent an instructional half hour at 49 Urquhart Street, Hawthorn on Saturday. It’s a good 20’s style home, north facing, and ticks a lot of boxes. The quote range was $1.4-1.6 million. It was on the market at $1.7 million and sold for $2,110,000.

What makes that instructional is that there were four parties still bidding beyond $2 million.

It breaks all records for the area. It suggests that the market has in many cases passed the peak of the 2007 boom and, if anything, is still moving up.

We spoke to one of the underbidders – still in a state of shock – who thought $2,050,000 would have been enough to buy the property. Bewildered and frustrated, they just want to buy a house and there are none for sale. They’re reaching boiling point.

In real estate terms, Melbourne appears to have repealed the law of gravity. We’re defying national and international trends and historic norms of what’s affordable.

What explains it?

Scarcity is the great contributor (no prizes for pointing that out), but no matter how scarce, buyers still need money and, theoretically, there’s not a lot of that about.

Peel a few layers from that onion (we’re still in the kitchen) and you start to uncover some significant exceptions:

there’s the just plain wealthy and they’re still rich
there are people such as medical specialists who have done well, who continue to do well, and who had planned to use the downturn to trade up
there are younger couples who are being underwritten by parents who believe there is more benefit in helping their kids now than by making them wait ’til the will is read
there’s the view expressed by a client of ours that he needs a house for 300 sleeps a year and they may as well be good ones because he doesn’t get that out of a stock certificate – suggesting there has been some flight from the stock market

http://www.morrellandkoren.com.au/topend/

 

[trainspotter]

Hey Hey Hey it's the Sunshine and Lollipops Brigade

A 4.5 per cent increase in Australian home values in the first half of 2009 heralds good news for the property market with improvements being recorded across all market price segments according to the combined RP Data-Rismark National Home Value Indices out today.

RP Data national research director Tim Lawless confirmed that prices improved across all price segments over the last six months, however growth is moderating as we move into the second half of 2009.

Rismark International managing director Christopher Joye said “Outside of cash, Australian residential property has proven to be a safer store of wealth for households than shares or commercial property.”

Mr Lawless said “The recovering residential environment comes as consumer and business confidence records large improvements. Housing finance approvals are trending upwards for both owner occupiers and investors, and auction clearances are averaging more than 70 percent across the nation.”

 

[moses]

Moses How many did you end up buying?

Not enough. Only one since I wrote that, but more on the way.

Our plans were scuppered when the market fell over and suddenly there were no buyers for my subdivision which consequently stuffed cashflow, values and removed a source of deposits. Bugger.

My real mistake was to try property development (subdivision) in hope of a higher quicker return. It seemed like a good idea then, but I've found I just don't have the time to make it happen and then got caught by the downturn before selling a single block. That mistake even forced me to sell an IP I'd rather have kept in a falling market (not good). We've hung on, swapped a country property for a rental city residence to refinance and are now back in the sharemarket. We hope to get our blocks moving in the spring which should provide deposits for the next round of IPs.

 

[kincella]

this is one terrific read, it has messages for both bulls and bears, pick the next hotspot....St Kilda is mentioned, Robots you will love it, and many spots in Sydney that will be known to Beej...
even Albury is noted as a hot spot.....
funny thing is some of us have known this for a few years now, so its good to see the valuers finally catching on...
reminds me..must check out Colliers for Commercial property, see how their hot spots are going
http://www.htw.com.au/Downloads/Files/210_August_2009_Month_In_Review.pdf

 

[trainspotter]

Geraldton. Oakajee announcement

http://www.thewest.com.au/default.aspx?MenuID=3&ContentID=157388

 

[robots]

hello,

well good evening and hope all enjoyed the day

thanks KIncella, great report and amazing commentary on St Kilda, it sure comes down to location location location

hey hey hey hey hey hey:

http://www.news.com.au/heraldsun/story/0,21985,25863985-661,00.html

the greatest financial event and some say bigger than 1929 and presto bricks & mortar shine again, this is amazing, just amazing

median unit price up 8.3%, cant even remember that posters name who keeps hounding me on it

a HUGE well done to those in the scene, Gav and Frink have timed it well most likely

thankyou
professor robots

 

[robots]

hello,

more great reading:

http://www.theage.com.au/national/housing-market-rebounds-20090731-e4k8.html

well done everyone, the $ just keep rolling, this is so easy

amazing, well done again

thankyou
professor robots