House prices to stagnate for 'years'

[xoa]

So offcoarse some years will be less than 10% or perhaps slightly negative, but on average 10% is achieveable.

Long term returns of 10% pa are impossible, unless: (a) you have an uncanny knack of buying the best investment properties, (b) credit is infinitely accessible, or (c) the income of home buyers grows at a similar pace.

Constant 10% gains across the entire market would cause mortgage repayments to exceed the median income within 20 years, which is clearly not going to happen.

 

[numbercruncher]

If an average 440k house rose at 10pc p/a for the next 20 years it will be 3m in 20 years.

If the average 55k wage grew at a very robust 5pc it would be 150k in 20 years.

Average house prices in Australia will NEVER get to this price to income multiple.

Itll eventually average out, If not a realestate correction like the rest of the world, then I suspect wages will continue to creep up along with Interest rates eventually bringing the price to earnings muliple back to historical averages.

 

[robots]

hello,

yes i seriously believe that,

it is a non-event for most,

for many who plod along on life's journey saving their hard earned (?), inflation is entirely irrelevant

thankyou

robots

 

[Judd]

for many who plod along on life's journey saving their hard earned (?), inflation is entirely irrelevant

In other words, 80+% of the Australian population are utter and total financial morons.

Thank you for confirming that.

 

[numbercruncher]

ANZ calling house prices to fall in NZ !

ANZ picks house prices, retail spending to drop

House prices are set to fall 5 per cent and maybe more, a national spending binge will slow to a trickle and the economy will move down a gear to a "benign" patch of soft growth, according to ANZ Bank.


The bank picks the economy to cool from 3 per cent growth last year to just 1.5 per cent this year.

The expected slowdown follows the longest period of economic growth in New Zealand since the 1960s.

"A weak outlook for housing dominates," the bank's latest quarterly forecast says.

The Reserve Bank raised interest rates four times last year to fight inflation and retail sales have flattened since March.

"The housing market has well and truly turned, with house sales (volumes) off over 30 per cent since the start of 2007," ANZ says.

http://www.stuff.co.nz/4390549a13.html

We arnt far behind If we arnt there already

 

[robots]

hello,

dont know how you get that, 80% of the pop dont save anything,

thankyou

robots

 

[robots]

hello,

are you ready NC, been down to see the bank manager, checked out where you are going to buy, or you buying with cold hard

spoken to any agents to get yourself known as ready to pick up all those bargains

thankyou

robots

 

[Tysonboss1]

If an average 440k house rose at 10pc p/a for the next 20 years it will be 3m in 20 years.

If the average 55k wage grew at a very robust 5pc it would be 150k in 20 years.

Average house prices in Australia will NEVER get to this price to income multiple.

Itll eventually average out, If not a realestate correction like the rest of the world, then I suspect wages will continue to creep up along with Interest rates eventually bringing the price to earnings muliple back to historical averages.

In my neighbor hood there is already un inhabitable leaking 3 bed homes selling for over $2m,....

In 20years the median home will be much higher density than it will be today,...

take the example that you used earlier of houses that sold for under $2000 over 100 years ago.

when you work out the 10% growth it seems unachieveable compared to todays median values but when you look at where those homes would have been and the value of that land today is worth a 100 times more then the median home, especially if you include the rental return in on the calculation they have easliy maintained growth of greater than 10%.

 

[Tysonboss1]

Constant 10% gains across the entire market would cause mortgage repayments to exceed the median income within 20 years, which is clearly not going to happen.

your wrong with this,...

your are making the mistake of simplifing your calculations,...and leaving out a major sourse of return,.. the rental return

You are not allowing for increased density,... for example your calcultion might say that a 1/4 acre block valued at $3m is not affordable so there fore is not possible,..

but if you put 10 units on it then it becomes afforadable,...

over time the true median home will change, there would have been a time when a 4bed house on a 1/4 acre block was cinsidered the median home. this is not the case anymore.

 

[BSD]

Sorry, but property prices cannot indefinitely rise by 10% per annum without wages following the same path.

in Australia, price growth has outstripped wages growth for such a period now that the % of disposable income required to fund rent/mortgages has reached new highs.

By definition, this cannot go on forever.

This is why from time-to-time property prices stagnate for years. Wages simply need to catch-up sometimes to fund reasonable rental returns and/or the financing expense.

See 1989-1999 Brisbane for an example.

 

[nioka]

It is no good talking averages when it comes to property. There is a finite supply of top positions. Those that own them now will get a greater return than those less favoured locations. Those on a lower income will not be able to afford them. The old law of supply and demand. Lower income people will have to settle for less by going smaller or further out. Those homes will be cheaper but that wont affect the continuous price rise of the established areas. The only thing that will reduce the price rise is a reduction in the population and that wont happen for a long time. The old Agents warcry "position, position, position."
Averages, they don't mean a thing when it comes to property.

 

[BSD]

It is no good talking averages when it comes to property. There is a finite supply of top positions. Those that own them now will get a greater return than those less favoured locations.

The only thing that will reduce the price rise is a reduction in the population and that wont happen for a long time. The old Agents warcry "position, position, position."

Averages, they don't mean a thing when it comes to property.

I totally agree regarding averages being BS. New homes and renovated homes go into the 'average prices of sales' and people think their existing non-renovated place has gone up by the same value.

However regarding your other points - The USA and UK are not seeing population decline; but they are sure seeing price declines in property values.

As for location we sort of agree. Blue chip property will out-do property for poor people in poor locations - simply because the incomes of rich people grow faster than those of poor people over the long term (see last post) and therefore the property they buy can go up at a faster pace over the long term.

That said, buying in a good location at or near the top of a property bubble is not going to stop you losing money in the short-medium term.

There are plently of waterfront condos in Florida selling or 30% discounts to their price of a couple of years ago.

 

[xoa]

your wrong with this,...

your are making the mistake of simplifing your calculations,...and leaving out a major sourse of return,.. the rental return

You are not allowing for increased density,... for example your calcultion might say that a 1/4 acre block valued at $3m is not affordable so there fore is not possible,..

but if you put 10 units on it then it becomes afforadable,...

over time the true median home will change, there would have been a time when a 4bed house on a 1/4 acre block was cinsidered the median home. this is not the case anymore.

All that is possible, but very unlikely for Australia as a whole. It might work, if you were investing in land near the Sydney or Melbourne CBD. Unless it's a good position, people aren't going to take out a 30 year loan to live in 90sqm..

If you want a good chance at long term 10% pa returns, invest in a major Chinese city. At least their incomes will rise fast enough to accommodate those returns.

 

[numbercruncher]

for many who plod along on life's journey saving their hard earned (?), inflation is entirely irrelevant

You live in a strange World Robots,

This may be true for the wealthy, but the RBA is literally declaring war on Inflation and rising prices, I fully expect another rate rise next month, and more this year, a senior Minister said he was thunderstruck by the strength of the banks language. Inflation is already at a 16 year high, and the RBA expects it to be higher by the end of the year !

IMHO retail interest rates at 10pc is very likely by years end, Fiscal policy by the Ruddmeister looks like it will have little effect slowing Inflation.

Inflation has now risen sharply and home owners have been warned that more rate rises are on the way after the RBA declared the economy needed to slow dramatically to curb price rises.

http://www.news.com.au/business/story/0,23636,23168789-14327,00.html?from=mostpop

RBA has declared war and they are letting you know in advance, good sports arnt they

Average household income is 90k ! subtract some tax, you have perhaps 70k , the average mortgage is 300k , at 9pc and guaranteed to rise rates, you do the numbers.

 

[theasxgorilla]

Average household income is 90k ! subtract some tax, you have perhaps 70k , the average mortgage is 300k , at 9pc and guaranteed to rise rates, you do the numbers.

Have you slipped a fact there numpty that you'd rather not have acknowledged knowing?

Perhaps you'll include 90 kilodollars as the basis for all future affordability calculations? Makes a difference, you do the numbers.

ASX.G

 

[Mofra]

hello,

yes i seriously believe that,

it is a non-event for most,

for many who plod along on life's journey saving their hard earned (?), inflation is entirely irrelevant

thankyou

robots

The majority of pensioners I know are only too aware of the reduction in spending power of the dollar. In fact, most people I know understand that matching inflation (with no tax burden) is really a 0% return.

Nothing personal, however it is scary to know that an "agent" who has such a lack of financial understanding will be "assisting" clients to make some of the largest financial transactions in their life

 

[theasxgorilla]

Great comments and agree. I'm waiting for renoing to go a bit out of favour so I can get fixer uppers at enough of a discount. You almost pay a premium for sh!tboxes because of the competition from renovators over here.

AS ever, the numbers have to add up, plus the factors you mention.

It's not yet though, even with the slump thus far.

Totally agree. In fact, scouting around the UK and Swedish r/e websites I'd say that the game is up for quite some time. At least with regards to the low hanging fruit ie. the small places that people can afford and aren't afraid to DIY.

The not so low hanging fruit will hopefully always be around. Found a horse farm over here on .85 of a hectare, with an almost finished stable (4 places) and plans/permits for a house. Nice setting, in amongst leafy and pine forest.

I don't know exactly what went wrong with their project, but they'll most likely have to take a discount for the project being half finished. Strangely though, the market hasn't really tightened up here yet. The economy is still expansive and the labour market continues to be tight. It's more likely that the owners found a better place down the road and didn't care that they'd lose money on this one.

WayneL, is .85 really too small for a horse farm? The missus says yes.

 

[nioka]

There are plently of waterfront condos in Florida selling or 30% discounts to their price of a couple of years ago.

Another reason why averages dont count. Global warming, cyclones, rising sea levels etc. Wrong position, wrong position, wrong position.

 

[numbercruncher]

Have you slipped a fact there numpty that you'd rather not have acknowledged knowing?

Perhaps you'll include 90 kilodollars as the basis for all future affordability calculations? Makes a difference, you do the numbers.

ASX.G

Gorilla Ill use any statistic that tickles your pickle, as long as its fact.

No point in using 90k as reference for owner occupied housing, but certainly useful for measuring investment property affordability, Australian average household income after tax is 70kish.

Australian median house price 420kish.

Retail interest rates 9pcish and probably rising.

Obviously you take issue with what I post, can you atleast counter argue with your own research ? I assume you believe average Australian realestate fits well with in the affordabilty threshold, could you demonstrate with some offical numbers, personal opinion etc ?

Also would you please kindly refrain from calling me numpty, I find it offensive, I know your a moderator but I would assume that holding such position doesnt give you free rein to intentionally antagonise other forum users in such a belittling fashion.

Thankyou.

 

[Tysonboss1]

Sorry, but property prices cannot indefinitely rise by 10% per annum without wages following the same path.

.

What I said was that a return of 10% pa is possible long term,..... which means if rental yeild is 5% you only have to have capital growth of 5%,...

or if you have rental return of 8% you only have to have a capital growth of 2%p/a.

there are multiple unlisted property trusts that hold office blocks in sydney melbourne and brisbane the have rental yeilds of over 8% and i am pretty sure they will have greater than 2% capital growth.