House prices to stagnate for 'years'

Tysonboss1 · 18 November 2007

theasxgorilla said:
I think that the perceived ability of the population to afford property is what is as likely to drive prices. IF the lenders and the borrowers think they can risk/afford to lend/borrow $500k over 50 years to buy their piece of the so-called Aussie dream, then every single time a lender lends a bit more or a borrower borrows a bit more then that transaction contributes to an increase in the stats.

And when everyone is believing what is written in the papers about the end of something or another then we all get nervous together and wait for the stories about rate rises and such to become old news again before we wade back in and start bidding prices up again.

Any truly impacting fundamental crunch for property has to be accompanied by unemployment IMO, and we haven't seen a tap of that kind of problem for a decade or so (with the exception of the IT sector, post 2000. And that was really just a shuffling around of people anyhow...very, very few who wanted to work found themselves unable to get jobs).

the things you have mentioned are the short term things that cause the shorterm up, flat, down, flat,up,flat,down,flat etc etc,

But as I said the steady growth in population is what drives the price of land higher in the long term,.. so if somthing does cause a longer than expected flat period or down period this will just cause the up period do be a sharper and longer boom,...
as happened in brisbane,... brisbane had an extended flat period in the late 90's but when the boom hit brisbanes boom was much sharper and lasted longer and brisbane is still one of the best performing cities.

the things you mentioned above are all short term factors and do not change the fact that demand for property will continue to grow because,

-people are living longer,
-International migration remains steady,
-growth in single person house holds means even if population was to stay the same more houses would be needeed.
- and many other reasons,

all the econmic factors can do nothing but slow the demand shorterm, eventually the factors of population growth will also cause a market correction and elevate the price of the land,...

numbercruncher · 18 November 2007

Well if thats the case our falling birth rate and aging population dont look so good for long term price growth.

Maybe Immigration can hold it up ? Itd want to be cashed up skilled Immigration though wouldnt you think ?

Tysonboss1 · 19 November 2007

numbercruncher said:
Well if thats the case our falling birth rate and aging population dont look so good for long term price growth.

Maybe Immigration can hold it up ? Itd want to be cashed up skilled Immigration though wouldnt you think ?

well even with the falling birth rate our population will still be growing,.... and remember probally more so than the actual population growth it's the actual demand for dwellings which as I said even if the population remained the same because of the growth of single person house holds the demand for dwellings around the capital cities will contiune to grow.

I don't really understand what you mean by immigrants would have to be cashed up,

I really don't understand how you guys are having so much trouble accepting future property growth will lock people out of the market,.... share traders are meant to be able to recognise longterm trends..... the fact is that the number of home owners compared to renters has been steadily falling for the last 40 years,.... and the age at which people can afford to buy there first home has been growing most new home owners are now nearly 30 compared with 20 in the 60's and a much larger % of the take home pay goes towards the payments,..

In sydney now it takes more than 1.6 peoples full time wages to pay the mortgatage on the median house price.

Mofra · 19 November 2007

Tysonboss1 said:
I really don't understand how you guys are having so much trouble accepting future property growth will lock people out of the market

In the short term, certainly. I was outbid at auction for an investment property 2 months ago, single bedroom unit went for $245k. Identical unit next to it sold for $272k this weekend. We are now in a phase of panic buying which is reinforcing the short term ternd.

wayneL · 19 November 2007

Over here in the Old Blighty, the market 4 ¬(+ed.

Agents are bitching, branches closing down and prices are starting to go down in most areas (even the official figures ).

There are actually some reasonable distressed seller deals at the moment... almost (but not quite) value. Many are stubbornly clinging to early 2007 values and are £20 - £50k overpriced and consequently not much is moving.

Oz RE is starting to look more exy than here in the middle class, reasonably well to do areas. Some may feel that's justified. I don't.

Julia · 19 November 2007

So how are you liking it over there so far, Wayne?

Just in time to enjoy the UK winter huh?

theasxgorilla · 19 November 2007

Tysonboss1 said:
In sydney now it takes more than 1.6 peoples full time wages to pay the mortgatage on the median house price.

I don't know what you'd like to infer from this...when was the last time Sydney was egalitarian enough (or Australia for that matter) to be blanketed with such a stat.

numbercruncher · 19 November 2007

wayneL said:
Over here in the Old Blighty, the market 4 ¬(+ed.

Agents are bitching, branches closing down and prices are starting to go down in most areas (even the official figures ).

There are actually some reasonable distressed seller deals at the moment... almost (but not quite) value. Many are stubbornly clinging to early 2007 values and are £20 - £50k overpriced and consequently not much is moving.

Oz RE is starting to look more exy than here in the middle class, reasonably well to do areas. Some may feel that's justified. I don't.

Good old dose of Stagflation starting to rear its head you reckon Wayne ?

Only thing missing to be 70's style might be the unemployment ?

Seems to be alot of Irrational optimism in the Aussie r/e market atm, but we tend to eventually follow the trend !

Tysonboss1 · 20 November 2007

wayneL said:
There are actually some reasonable distressed seller deals at the moment... almost (but not quite) value. Many are stubbornly clinging to early 2007 values and are £20 - £50k overpriced and consequently not much is moving.

.

Yep,.. perfectly normal part of the property cycle

Tysonboss1 · 20 November 2007

theasxgorilla said:
I don't know what you'd like to infer from this...when was the last time Sydney was egalitarian enough (or Australia for that matter) to be blanketed with such a stat.

just comparing the average wage (based on the mortgate payment being 40% of there wage) to the repayments of a 25 year loan based on the median house price,.... It would take 1.6 average wage earners to pay of an average home in 25 years.

Tysonboss1 · 20 November 2007

numbercruncher said:
Seems to be alot of Irrational optimism in the Aussie r/e market atm, but we tend to eventually follow the trend !

Well the timing is right for optimism to start again,.... sydney has had it's down turn and is working through it's flat period,..... rental yeilds have be increasing.

I can't really see how it could be irrational optimism, after all if a company had a steaily increasing dividend you would expect it's share price to follow eventually,.... it'd the same with property.

wayneL · 20 November 2007

Julia said:
So how are you liking it over there so far, Wayne?

Just in time to enjoy the UK winter huh?

I was driving in snow last night through the Cotwolds... cold, but lovely. We've picked a particularly nice part of the country (Cheltenham), nice spot and really nice people, so enjoying it a lot. We're hooked.

Actually had an ace opportunity come up over in a town called Basingstoke, but it would be really hard to leave this area... in a quandry at the moment.

krisbarry · 20 November 2007

Tysonboss1 said:
In sydney now it takes more than 1.6 peoples full time wages to pay the mortgatage on the median house price.

Surely this figure incorrect.

Even in Adelaide it take 2 full-time wages or $100,000 to service the average house loan for an average house.

Please re-check your figures. Adelaide V's Sydney Hmmmmmm!

Tysonboss1 · 20 November 2007

Stop_the_clock said:
Surely this figure incorrect.

Even in Adelaide it take 2 full-time wages or $100,000 to service the average house loan for an average house.

Please re-check your figures. Adelaide V's Sydney Hmmmmmm!

Well these are not my figures,... they were qouted in a property investment magazine about 12months ago,

I guess it comes down to what the average income is,... maybe sydney is a bit higher,...

what is the median house price in adeliade,.... because based on the $100,000 earnings a family could repay a loan for $430,686,.... I didn't think the median house was that much in adelaide.

numbercruncher · 20 November 2007

Good little read on rent vrs buy in current market

Six-figure salary and still renting
Author: Alex Tibbitts
Date: November 7, 2007
Publication: Sydney Morning Herald (subscribe)
Australia's obsession with the quarter-acre block and climbing on the mortgage treadmill is not for everyone, writes Alex Tibbitts.

Daniel Cox has a six-figure salary but he still rents.

"Having got my specialty qualification as an anaesthetist [last year], my income had risen quite significantly," Cox says. "Despite that, I decided not to buy a house because I could rent one much better."

The 39-year-old (pictured) has rented a five-bedroom waterfront home at Cronulla for $950 a week to share with his wife and four children, aged 5, 8, 10 and 14.

"I can watch my eldest son windsurf on the bay," Cox says.

"That's part of our decision with the renting. We choose to work less than we have to. My wife stays home rather than go to work to service a humungous mortgage and I'll work four days a week."

To illustrate the difference between renting and buying he looks next door.

"The three-bedroom house next door sold for $2.25 million," he says.

"The interest on $2.25 million is almost $150,000 [for a year at about 6.7 per cent]. That's more than three times as much [as my rent]. If you had $2.25 million sitting in the bank you could rent this house and still have $100,000 a year to live off in interest.

"I have a few hundred thousand saved and generated through investing. I could use it as a deposit towards a house but if it doesn't make sense to buy if you have the money, then it makes less sense to buy if you're borrowing the money.

http://www.domain.com.au/Public/Article.aspx?id=1194329261897&index=NationalIndex&headline=Six-figure%20salary%20and%20still%20renting?s_cid=FDMedia:RateRiseRent:NA:091107:intratespoll&ref=patrick.net

gfresh · 20 November 2007

Depends what you do with the money.. bet that bloke paying the mortgage on the $2.25M is using it as leverage against something, say another few properties .. each also appreciating nicely in value.

He mentions "If you had $2.25 million sitting in the bank...", but unfortunately not many people are in a position to be in that sort of pure cash position, they only have say 1/10 of that, the rest is leveraged.

If you rent and are able to use the excess savings effectively to gear some other investments that you may be able to achieve the same effect. But it's difficult to obtain as much leverage through any lender, as through a property.

Tysonboss1 · 20 November 2007

numbercruncher said:
Good little read on rent vrs buy in current market

What is the piont you were trying to make with your last post number cruncher,...

Gentle man in the article has flaws in his thinking he may have missed some very important points in his deceison ,...

- the amount of Rent he has to pay will increase over the years at a rate higher than inflation,... where as his mortgage payment and the total amount owed on his homeloan would decrease with inflation.

-so If he had bought the house the house (his capital) would go up in value over the years as his repayments went down,... but if he rents and puts his money in the bank the capital will decrease as his rent increases.

-Another piont is that he is obviously living above his means as he said he has choosen to rent a house that is better than the one he could other wise afford to buy,..... so they have choosen life style over longterm security,.. nothing wrong with that offcoarse they just should realise the sacrificices they are making.

robots · 20 November 2007

hello,

recent study showed also that the average wealth of home owner was around 400k versus average wealth of renter at 50k

both strategies are sound as long as the savings is put away by the renter and that is the big hurdle,

coming up to the end of the year its great to see RE going well

as many know dwellings being built is down on dwellings required but research indicates that even if council gave green light for development to match required, no way could they be constructed per annum due to labour issue

thankyou

robots

professor_frink · 20 November 2007

Tysonboss1 said:
- the amount of Rent he has to pay will increase over the years at a rate higher than inflation,... where as his mortgage payment and the total amount owed on his homeloan would decrease with inflation.

Where did you get that from? If rentals appreciate at a rate higher than inflation, won't most people will end up homeless eventually

Tysonboss1 · 20 November 2007

gfresh said:
Depends what you do with the money.. bet that bloke paying the mortgage on the $2.25M is using it as leverage against something, say another few properties .. each also appreciating nicely in value.

.

Top end Properties like this one do not normally make great investments, they will have good growth but the cashflow side of things lets them down as the rent is not high in comparison to the price,...

however alot of people by them as "anchor" properties,.... meaning they may be a CEO or some other high flyer than is constantly moving around australia or the world but they one day want to move back and settle in a particle place so they by a property there at todays prices so no matter how much the price goes up they can always move in or sell it and by a diferent one in that area.

I myself have an anchor property in my home town in brisbane, when i eventually move back I will either move into this house because it's in a great location that I love, or sell it and by another that I prefer in that area.

House prices to stagnate for 'years'

Tysonboss1

numbercruncher

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