House prices to keep rising for years

[Bill M]

People can say whatever they like but house prices just keep going up and up. My area in the Northern beaches of Sydney is still running hot, a fibro home sold for $806,000, article to follow.

---------------------------

INTEREST rates have gone up, the first home buyer’s grant has scaled back yet people are out in droves looking for an affordable family home.

Bidding opened at $600,000 and kept climbing until the hammer fell at $806,000.

The fibro was bought by a young couple with two children who had been looking for a knock-down.

Agents report that family homes are in short supply and there are only four other properties currently for sale in Narraweena - affordable suburbs such as Narraweena and Dee Why West are in big demand.

Full story here

 

[robots]

A typical no content post designed to inflame.

But please Robots, give us your prediction for house price increase over the next twelve months. Give us some indication you actually have some understanding of market forces and not just herd mentality.

And please, give me an answer to the questions I have posted on this site, including : what has housing contributed to GDP.

hello,

you can spend your time worrying about GDP, i wont

just buy, have been saying it for many years and they even had to close (and delete) a thread here at ASF to save the bacon of many posters as it was so embarrassing

gee it would be embarrassing to be a holder of international property, especially in the US or UK, poor investment choices, oh yeah

they said dont buy in 2001, 2003, 2005, 2007, value is going to return,

i know quite a few who sold listening to goons with blogs and they are stuffed know, stuffed

spot on Bill M,

thankyou
professor robots

 

[Aussiejeff]

Hurry, hurry, hurry!

Buy NOW before they're all gone!

http://www.news.com.au/business/money/story/0,28323,26181346-5013951,00.html

HAI!

 

[robots]

hello,

http://www.theage.com.au/business/house-prices-hotting-up-20091010-grnf.html

well done to this guy to stand up to all the bully's who clearly have no idea

well done to all the real estate agents who GOT IT RIGHT

and commiserations to all the Financial Advisors, Fund Managers, CFD Experts/promoters, Economists, Futures/Option houses who GOT IT WRONG

this is amazing, things never seen before

thankyou
professor robots

 

[wayneL]

You're getting a bit shrill there Robbie.

Not surprising really, considering the VI.

 

[MrBurns]

Rudds thrown the whole thing open to foreigners, particularly the Chinese, guess who'll be voting for him next time.

I've heard stories of Chinese waving their cheque books in the middle of auctions shouting "how much do you want" bringing the whole thing undone then walking away and leaving the property vacant as they just want it for the capital appreciation.

They buy over the web on property sight unseen, just to take advantage of Rudd's generosity in letting them invest here unrestricted and stuff the Aussie couples who miss out.

He speaks Chinese, he's pandering to the Chinese, he will get every Chinese vote next time around, cunning little vermin he is

 

[Vizion]

From that article Jeff posted, one of the estate agents is a former plastic surgeon and financial adviser!? WTF? there is more money in selling property in Melbourne to Chinese buyers than being a surgeon? That has to say something about realestate agenst fee's...

 

[satanoperca]

Mr Burns, there could be even more to it than just votes, maybe Krudd opened the flood gates to RE investment in this country as a trade off for when the government is so indebted that it needs to raise more capital and has run out of buyers so has traded treasury bills for RE in this country with the Chinese.

Whether people like it or not, Australia will and is become another asian country. For those that are unaware we had a huge chinese population during the gold rush era in the 1800's.

Bill M, your one off sale of property in Sydney is fanastic news for all those investors in Sydney that have seen prices stagnate for the last 6 years according to the ABS figures and would have been better of putting their money in the bank.

Cheers

PS the next interest rate rise and further reduction of the FHBG is just around the corner. Who is going to buy properties next year - yes we must all hope and wish the Chinese are our saviour.

 

[robots]

You're getting a bit shrill there Robbie.

Not surprising really, considering the VI.

hello,

just the facts

thankyou
professor robots

 

[wayneL]

hello,

just the facts

thankyou
professor robots

With some trollish embellishments.

 

[robots]

hello,

just discussion and debate, truth and honesty

helping out fellow man to achieve financial freedom in life

thankyou
professor robots

 

[Glen48]

This is good we already have the most expensive RE in the World in relation to income and prices are still going up soon, a tent in a back yard with be worth a Mill. Put in a Media room,ree insulation with Down lights to light the place up, 50% Tax rebate to get deeper in to debt,House Insurance going up, car insurance going up, cost of power going up, Un- employment going up, Medical going up , IR going up,Tax's to go up to pay for all this. How stupid are the other Country doing exactly the same thing yet they are going down the gurgler.
You have to hand it to Rudd if he called an election he would pick up 22 more seats here is a man who will go down in history.
Unless Rudd calls an early election forget the Drover's dog a Dead Dingo will lead the Libs to power and no one will vote Labor or go near property for a long time.

 

[Soft Dough]

This is good we already have the most expensive RE in the World in relation to income and prices are still going up soon

Yeah "cause we are different"

Where is the extra gearing going to come from going forward?

Plus, Robots, I note that you failed to give a prediction of how much property prices are going to rise over the next 12 months - just remember the stupidest goats are the last to turn.

 

[Beej]

But please Robots, give us your prediction for house price increase over the next twelve months. Give us some indication you actually have some understanding of market forces and not just herd mentality.

I'll give you a 99.99999% certain prediction: there will be no price crash (20%+ plus across the board falls) in the next 12 months.

And please, give me an answer to the questions I have posted on this site, including : what has housing contributed to GDP.

Quite a lot actually, for a start, about ~100,000 new dwellings are built each year. At an average cost of let's say $250k, there's $25B in GDP right there which is 2.5% of total GDP. Then there's all the renovations, extensions, maintenance, etc etc that is done. How big is Bunnings? Pretty much 100% of the revenue of Bunnings flows from the housing sector. I have seen estimates in the range of another $30B-$40B in value for renos/extensions/house maintenance etc. So there's another 3-4% of GDP right there. So just on the back of the envelope we are now at housing directly contributing 5-6+% = $50B-$60B of Australia's GDP.

Now add the that the indirect flow on, ie when someone buys a new house they also tend to buy new furniture, rugs, linen etc etc. Housing also provides shelter, which every worker in the country needs, so without the shelter there would no GDP as there would be nowhere for productive workers (including those who work in export industries) and their families to live! (Whether they own or rent). That's a pretty big indirect contribution to GDP I would say!

So what's your argument? That housing contributes nothing to GDP? That's just nonsense if that's what you are trying to say. I mean how do you think modern economies work? Do you think everyone lives in caves? What do you think increasing living standards are all about? You don't think that just maybe the quality, size, location, amenity etc of the homes we live in are a big factor in our standard of living? Isn't improving standard of living the end goal of all economic growth? You think this can be achieved without expending economic resources (= contributing to GDP by definition)?

I'll give you an answer, SFA.

Just another ponzi scheme that's destined to end up like all ponzi schemes when a greater fool can no longer be found.

So Cutz is another one naive enough to believe that housing has no direct or indirect impact on GDP? Really you guys need to get back to school.....

As for the housing market being a ponzi scheme, what a load of crap! A ponzi by definition means that money being drawn out of the scheme must come from new money being put in by the next round of "suckers", and no actual assets are every actually acquired. In the case of property, an ASSET is acquired, a real asset that you can touch and feel, and even live in! Income can be generated at the rate of 4.5-5.5%pa from rent returns (or rent saved), so it's not a ponzi because the invested money going in is actually used to purchase INCOME PRODUCING ASSETS. You can argue all you like about the PRICE vs the VALUE of the property/asset (as I'm sure you will), but an income producing asset being over (or under) priced does NOT a ponzi make!

Now the fact that you can buy a cheaper house, pay it off, and then "shock horror" afford to buy a more expensive house in a better area with the money you get from the sale of your first house, does NOT a ponzi make!!! A MARKET it makes yes - first time buyers on average incomes enter at the bottom end of the market, and higher income earners and people who were previously first time buyers move up into the upper ends of the market. Pretty simple stuff really. I mean what do you expect - that all houses in all area's of the country should sell for the exact same price? Regardless of size, amenity, location, condition etc etc??? I mean really one of the DUMBEST things I read on forums like this is the description of the property market as a ponzi scheme...... By this definition every share market, derivatives market etc on the planet is a ponzi....

PS: From wikipedia.org:

Definition of Ponzi:

A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned.

Definition of a Market:

In mainstream economics, the concept of a market is any structure that allows buyers and sellers to exchange any type of goods, services and information. The exchange of goods or services for money is a transaction. Market participants consist of all the buyers and sellers of a good who influence its price

I was going to comment on Mr Burns' post going on about all the Chinese buyers and blaming Rudd for everything that's wrong with the housing market, but I really can't be bothered to go there.

Cheers,

Beej

 

[robots]

hello,

well done Beej

yes even the "existing dwelling" purchase provides numerous flow-ons, people soon paint walls, do landscaping, build fences, put a new aerial up etc etc

thankyou
professor robots

 

[wayneL]

Beej has good points.

Unfortunately he neglects speculative artefact and diversion of investable funds from other important sectors of the economy. The long term effect should be considered.

A narrow focus unfortunately precludes a balanced view.

 

[Soft Dough]

hello,

well done Beej

yes even the "existing dwelling" purchase provides numerous flow-ons, people soon paint walls, do landscaping, build fences, put a new aerial up etc etc

thankyou
professor robots

So please explain how this increases wealth.

Can you?

Or do you know the real answer.

 

[wayneL]

The Kiwis are recognising the negative impact of property speculation and the drag it causes on "productive" investment.

I like how they are thinking.

http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=10602457

...investors should expect moves against property.

I don't think policy shifts will be directed against owner-occupied houses - New Zealand's home ownership rate has declined over the past decade and no one wants to see it fall further.

However, there is already a groundswell against property speculation and those who own rental property should be wary...

I don't think the Government will impose a capital gains tax - government agencies know this will not permanently suppress property values.

However, the Tax Working Group, Treasury, the Inland Revenue and others in Government have rental property tax in their sights.

One of the Tax Working Group's ideas is a tax based on the Risk Free Rate Method (RFRM)....


...But by itself, it will not do enough to permanently shift New Zealand investment behaviour away from houses. That will take improved capital markets and encouragement of other investments.

A RFRM tax poses difficulties: investors would have to value their properties each year. Who would be used to do these valuations? And there would be a disincentive to repay debt as that would increase equity and therefore tax to pay.

But if not this tax, there will be another. At present, on aggregate, no tax is collected from property investment even though it is a $200 billion industry and there is determination to do something about rising property values.

This is not a time to have all your wealth tied up in residential rentals. With low yields and talk of new taxes, the risk at present is on the downside.

 

[Beej]

Beej has good points.

Unfortunately he neglects speculative artefact and diversion of investable funds from other important sectors of the economy. The long term effect should be considered.

A narrow focus unfortunately precludes a [un?]balanced view.

Yes but that wasn't the question asked. Like anything in the economy, there is always the potential for too much money to flow into area's that might be considered "less productive" than others due to speculation. However the same argument against house prices on this front could be made against the bulk of share trading that goes on, the speculative side of just about every futures trade, the diversion of consumer spending to imported goods and so and so on. I mean is people investing in Gold "productive"? No way! Gold does nothing, it can't even generate some income, yet large amounts of capital flow to buy the stuff because people perceive it is a way to protect their wealth. How come everyone isn't banging on about all the wasted money flowing into "unproductive" gold? It's tripled in price in the last 10 years as well right?

No matter what you can not make 100% of your available capital in an economy flow into those things and only those things deamed "correct" or "productive" by whatever authority may deem it so at any particular time. It is a fact that land as a commodity is valued and scarce (in that you can't really create more when you look at particular locations etc). Housing is a utility that is in demand, as it forms a major part of people's standard of living.

The 2 combined (land + house) makes property valuable, because it is desired and in demand. At the end the day this will result in a situation where prices are set based on the capacity of those generating the demand to pay (derived from wages/incomes - not just average, availability of credit, cost of credit, other sources of capital like the share market etc, savings, stored wealth and so on).

For these reasons, no dry economic argument anyone makes about the productive use/flow of capital is going to change the behaviour of the housing market, which will always be driven by those fundamentals listed.

So please explain how this increases wealth.

Can you?

Or do you know the real answer.

Well the housing market has certainly increased *my* wealth a lot over the past 20 years!! Having said that, imagine the country with 1M people, and no houses. Now imagine that all those people work for a year and build 250,000 homes for them all to live in. Are they all now wealthier than they were 1 year earlier? Of course they are! And the wealth was generated by their work in building those houses that they now own. So of course housing generates "wealth". Do you know a "wealthy" person who lives in a mud hut? How about a "wealthy" country where they all live in caves? Now of course a speculation driven rise in ANY asset price (which happens from time to time with just about anything) is not terribly productive economically speaking, but why single the housing market out in this respect? It's a valuable/desired commodity and so will have a market driven price, just live anything else.

Let me ask you another question - how does share trading (short term) increase a countries wealth? How does buying Gold increase a countries wealth? How does me buying a big screen LCD TV or a car increase the countries wealth? Are all these things bad? Do you criticise share traders and the share market in the same manner as you criticise the housing market?

Anyway bottom line it doesn't matter what you make of the economic argument, the housing market is what the housing market is. You are not going to change it, as we don't live in a communist country! Play the game how ever you choose, rent or buy your PPOR, invest in property for long term income, invest purely speculatively hoping only for capital gain, don't invest in property at all, whatever! It's everyone's individual choice. I've tried to provide info on this thread on how the market works over the long term, and how to use it to your long term financial advantage, but everyone can of course do whatever they want! It's a free country!

Cheers,

Beej

 

[Soft Dough]

The Kiwis are recognising the negative impact of property speculation and the drag it causes on "productive" investment.

I like how they are thinking.

http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=10602457

The banks would love a plan as such - deem a return on equity but allow residential property loans as a tax deduction