Australian (ASX) Stock Market Forum

House prices to stagnate for 'years'

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Tysonboss1 said:
the true median in brisbane in 2004 was below, $350,000.

If you bought a house in brisbane in 2004 it would now be costing you about the same to hold as it does to rent, and year by year will just get better and better,
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What was the Median price in Brisbane 2004 for a house ? I sold a very average GC house in 02 for not much less.

Even if the 2004 guy paid his mortgage down to 300k, hes now paying 9pc + outgoings but can still rent for only $400 (not to mention his unrealised equity would earn interest @ 7pc+). Still a big difference and hes still got prior years interest payments/ rental difference for catchup.
 
theasxgorilla said:
Fine, so property stagnated. Inflation and interest rates have been compensated for by income tax cuts, wage increases and a strong dollar reducing the cost of imports. Where is the affordability crisis that you've been harping on about for countless posts now?

ASX.G
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Hello


Obviously you only selectively read my posts. But I may as well answer the same thing again, better being accused of harping than Ignoring people I guess.

Its the Media talking about affordability crisis, and many voters at the last election, Im here debating house prices stagnating for years or similar to that effect. But I do believe affordability is a huge issue going forward, why not have a crack at proving it isnt an issue ? Obviously I have been wrong (over the past 12mnths) looking at last years average RE price increases, assuming they arnt a little fudged.

Just to repeat ...

Median household after tax income 70k, Median Brisbane house price 420k, Interest rates 9pc, Inflation skyrocketing.

Something has to alter in this equation in my interpretation, Wages may surge, but that means so will Interest rates.

Owner occupied realestate is my major interest of this discussion, the numbers simply dont stack up from a purely financial view point.

Investor property, sure, if you must, deductability makes the absolute world of difference.

Perhaps we could end up a nation of Renters who all own an Investment property and effectively pay no tax ? :eek: Yah sure that'd work with a shrinking Labor force :)
 
numbercruncher said:
Its the Media talking about affordability crisis, and many voters at the last election, Im here debating house prices stagnating for years or similar to that effect.
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As I have said before, so long as you know where you stand because I for the life of me can't figure it out. It looks like you are more interested in taking the other side of an argument than actually 'exploring the truth'.

numbercruncher said:
Median household after tax income 70k, Median Brisbane house price 420k, Interest rates 9pc, Inflation skyrocketing.

Something has to alter in this equation in my interpretation, Wages may surge, but that means so will Interest rates.
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This is Media speak. These words are used evocatively by the Media because it gets people talking about their news so much more effectively than just saying inflation is much higher than it has been and higher than what the RBA is comfortable with, and the same can be said for wages, and this is why the RBA must keep increasing, sorry HIKING interest rates.

Believe me when I say that I agree with some of the things you point out. But as I have said on other occasions...we're all quite capable of finding out own news stories to support different sides of this argument:

http://news.theage.com.au/swan-pours-cold-water-on-recession-talk/20080210-1rar.html

LOOK! Labour will fix the inflation situation with tax cuts of it's own.

http://www.news.com.au/perthnow/story/0,21598,23180151-2761,00.html

LOOK! The rental market in Perth is still out of control...ought to keep those stagnating house prices up above Sydney median-house-price crushing levels!

Percentages and ratios don't mean much to me. There are economies on earth that continue to function when the norm is 40%+ of wages towards paying the rent. Yes, that's right, RENT, not mortgage repayments. As people are continuously pointing out throughout this thread, the place you live is of utmost importance. It's a philosophical discussion, but what is your wage for anyhow? In neo-serfdom, you work in order to earn your keep on the allotted plot of your choosing*. Does it matter to you or anyone else if that is 20% or 50% of what you earn in a month? If you can afford all the other things that a 2008 household demands like broadband, an entertainment system, a barbecue, a car in the driveway and enough new socks and jocks for everyone, does it matter that the absolute dollar amount you paid for these 'necessities' is higher than it used to be?

If the US goes to **** like it is it will take the rest of the world with it in one form or another. Expect to see some of the ugly affordability and inflation stats we keep seeing come back into line. But IMO expecting a return to long term averages is folly. What has happened to this country in the last fifteen years is far, far, far from average. It's been to our country what oil was to Norway. It has lifted us all up a step in living standards yet unfortunately that has been a little bit of a unevenly spread benefit. Because once upon a time we all had a wife, 2.3 kids, a 3-bedroom house on a quarter acre block within a commutable distance of the city and an Aussie big-six in the driveway to look forward to. Now what? It's different isn't it? It's changing. There is no stereotypical description of what we have to look forward to now. How do you apply stats to this? Not easy. I don't even bother trying.

* "allotted plot of your choosing" might sound like a contradiction. But do you really think you have a "choice" when all of our capital cities are basked in the glory of suburban homogeneity? Was it really a choice when your house is the same as the one three doors up, only you picked carpets where they instead chose the wooden overlay?

The people who really get to choose where they live are not from the neo-serf class.

ASX.G
 
LOOK! Labour will fix the inflation situation with tax cuts of it's own.
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Is that what fixes Inflation ? ..

Glad you bought up Perth, Tightest rental market in the Country and prices slipped 0.4 per cent in the December quarter, hints at peak prices to me.

Funnily enough only place I currently have any re exposure :eek:
 
numbercruncher said:
Is that what fixes Inflation ? ..

Glad you bought up Perth, Tightest rental market in the Country and prices slipped 0.4 per cent in the December quarter, hints at peak prices to me.

Funnily enough only place I currently have any re exposure :eek:
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Chicken, egg, who knows? The traditional view is that if you introduce more money into the system relative to the supply of goods and services you will generate inflation. What this is doing is not creating money, but shifting it from one place to another. Futhermore, the traditional view is that private utility of money is more efficient than government. If we believe this then we can say that the amount of money stays the same, but what we receive as goods and services in exchange for that money will be greater. Therefore, relatively speaking, you have increased the supply of goods and services relative to money. Yes, that would be counter inflationary, if you believe all the aforementioned. On one hand I do, and on the other I think economics is a bunch of manipulated hocus pocus. I'd never reject the opportunity to get more of the money I earn under my own control, so it's a good thing either way.

Re: Perth peaking...a peak is a peak until it's not. If you are competent at picking them you should consider trading the sharemarket too...you would have made a killing recently :D

ASX.G
 
So if ive interpreted you correctly, you are non committal to both rising or falling prices for reasons outlined.

But one thing you are confident of is a return to long term averages isnt going to happen.

I find that interesting, and a big call, and perhaps a much harder debate to win against the masses !

So many tidbits point to that being inevitable (all open to individual interpretation of coarse), not just at a historical level but looking at current world events, US and Canada for example Realestate runs at 3x earnings and much lower interest rates.

Might,imho, take a while to play out, but just look at our rapidly aging population as an example, bargaining power will become tremendous for workers wages short of massive Immigration. Whats to say skyrocketing wages doesnt pull it back to 4x from 8x. Also a counter argument would be whats to say skyrocketing wages doesnt double house prices, well Interest rate rises perhaps.

Supply, despite what the media says, seems to me to be keeping up with demand, Last year 150k dwellings built and 300k population growth.

I think history and my interpretation of it has shown Realestate at 8x multiples to be unsustainable, and preceded some of the greatest crashes, the only way this thread will choose who ideas are wrong and whos are right and who was in between is with the benefit of hindsight.

In the mean time its a good thread, I hope it remains that way, Im sure it will if we all play the ball :)
 
theasxgorilla said:
Re: Perth peaking...a peak is a peak until it's not. If you are competent at picking them you should consider trading the sharemarket too...you would have made a killing recently :D
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Picked it perfectly actually, didnt so much make a fortune as save a fortune, even managed to get super into the cash option :eek:

Golds been my best hold this past year.

Just a shame i wasnt prudent enough to place short bets, still a pleasant result :) , and as they say, the greedy become the needy, wether thats true in practice is another thing :cool:
 
numbercruncher said:
So if ive interpreted you correctly, you are non committal to both rising or falling prices for reasons outlined.
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I don't know what will happen, if that's what you mean. I do know that in various neighbourhoods around the country that today you can't find a property for the same entry-level prices that you could 2 years ago. That has made them unaffordable for some. It also means that prices were absolutely not stagnating. You get my drift, buddy? It can't be both ways. That's hindsight...we got it now, so we can use it to describe what has happened, in spite of the best analysis efforts of the experts who were quoted in the article that started this thread.

I can tell you what I want to happen. US goes into recession (probably has already). I don't wish it because I don't like Americans or think they deserve it. I simply don't see an alternative. China splutters. Europe has to deal with some fallout (the Yanks will use it as an excuse to tell the Europeans they should be more like the Americans, like they always do). Australia looks at all this 8x multiple, 10% interest rates, inflation above 4% and down the barrel of lower commodity prices and a rising dollar and goes, "****, stop buying, sell property". And we get about 2-3 years where people don't know whether it really is the much talked about return-to-historical-averages or just a pause along the way to greater prosperity. A plethora of bad news media articles backed by 'factual stats' will keep them guessing. Providing it's the latter and not the former, within this period will lie buying opportunities. This is what I'm looking for.

The US is in the habit of bankrupting and litigating and regulating away it's mistakes. Expect that process to take 2-3 years. I have no evidence to back this up, just the strong hunch that the people at the helm will do everything in their power to engineer another post-911 soft landing. If they succeed, what do we have to worry about again? Even if we agree that they're just covering up the rot, what can YOU or I do about it? Lassie fair.

And China seems to have a lot of work (read potential) still left to do. Expect them to wade back in when their market shocks are complete and commodity prices start looking like bargains compared to historical price highs.

numbercruncher said:
But one thing you are confident of is a return to long term averages isnt going to happen.

I find that interesting, and a big call, and perhaps a much harder debate to win against the masses !
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That's okay, I'm not here to convince the masses :). I find that medium-to-long term moving averages are much more effective at defining perceived value (the only important measure of value). Grown-ups have such short memories. We don't remember with that much detail what it was like back in 1998, let alone 1908. Reference points of value are shifting daily. Long term static averages are pathetically simplistic. If human evolution was meant to track along with such a measure of consistence then so much of the 20th century ought never have happened. Certain combinations of events can be´synergistic in benefit. As they occur they smash static averages to pieces.

How do you model the benefit of the Internet and broadband into the cost of housing? If businesses people used to have to rent office space, but now they can work from home, does the cost of housing go up in response to this shift?
 
A few interesting graphs, which put the recent spike in perspective. The savings/debt graphs reveal what's driven the boom. The American data doesn't reflect their recent crash.

ausrealhomepricehg1.gif

householdnetsavingsaw3.gif

householddebtqe8.gif
 
xoa said:
A few interesting graphs, which put the recent spike in perspective. The savings/debt graphs reveal what's driven the boom. The American data doesn't reflect their recent crash.
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where did you find inflation and housing statistics going back that far xoa?
 
professor_frink said:
where did you find inflation and housing statistics going back that far xoa?
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http://www.library.unsw.edu.au/~the...ved/adt-NUN20071210.120652/public/02whole.pdf

Median capital city house prices 1880-2006, real and nominal, starts on page 64. Inflation data 1880-2006 starts on page 280.

It'd be interesting to chart the rental yields (page 73) too. Net rental yields had fallen to a dismal 1.10% in the last recorded year (2005). It'd be even worse now. Rents clearly aren't keeping pace with the asset bubble.
 
explod said:
You make some good points but to say forget the stock market is an error for the fundamental of diversity. I brought my first property in 1968 and the journey has been very good. In the last 5 years I have felt (wrong to some extent) that the big gains in property (like from 1970 to 76) are not there.

In the last few years I have averaged around 70% a year on the stockmarket with my effort being, good mid chip stocks for growth instead of yield. Like you I do the trend research. With the stock market changing conditions I find easier to detect and stocks can be disposed of at the click of a mouse compared with property, minimum a couple of months.

My last good property venture was two choice blocks of land with sea views, held them for a little more than 12 months and almost doubled my money. That was in 02/03. The same blocks have not moved in price since as they are a bit far from town and a few too many of them.

Good properties in the right place no worries but I will have the stock market at the moment by a mile.

Of course I am talking copper (in global short supply) and gold (going up as a hedge against weakening currencies) with stocks like Oxiana, Incetec Pivot, Lihir Gold, Wannambool Cheese and Butter and I think Wollies for food will be kind with some dividends thrown in.
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Hi Explod you make a good point about returns from the stock market, good traders I find (personal experience and small sample) generally have excellent returns particularly during bull markets and not surprised by your own experience.
The thing I found (again personal experience and small sample given the total scale) approximately 5 to 6 years ago I struggled to find a lot of long term successful market investors / traders that could match the returns of property investors. But I ran into plenty of people who had blown trading accounts big time.

As for successful property investors there was heaps more, think of any number in dollars and I dare say I know or could have found some one at the time who had the cash in the bank. Of course after the boom / bubble here you can times that by ten.

I hear all the time how the market out performs property yet I simply couldn't find hard evidence of that with the numbers of people on the ground who have actually done this.

XOA Which areas are these? And is this 10% adjusted for inflation? I seriously doubt it.
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There were a reasonable number but remember looking at Mount Hawthorn and some of the adjoining suburbs that sat within 10K of Perth central as that was part of the criteria. I believe that this applied to most of Oz capital cities at the time.

Adjusted for inflation? no

Last point before I get sucked into this black hole and that is to state the obvious property investing strategies 5 or 6 years ago are not what is going to give the superior returns today bit like going long in a bear market.

OK beam me up Scotty


Focus
 
xoa said:
http://www.library.unsw.edu.au/~the...ved/adt-NUN20071210.120652/public/02whole.pdf

Median capital city house prices 1880-2006, real and nominal, starts on page 64. Inflation data 1880-2006 starts on page 280.

It'd be interesting to chart the rental yields (page 73) too. Net rental yields had fallen to a dismal 1.10% in the last recorded year (2005). It'd be even worse now. Rents clearly aren't keeping pace with the asset bubble.
Click to expand...

where are the properites that are renting on yeilds of 1.1%.

I have never seen properites renting on these yeilds

I would like to see an example of an area where properties rent on yeilds this low,... It's just not happening,
 
xoa said:
A few interesting graphs, which put the recent spike in perspective. The savings/debt graphs reveal what's driven the boom. The American data doesn't reflect their recent crash.

ausrealhomepricehg1.gif

householdnetsavingsaw3.gif

householddebtqe8.gif
Click to expand...

Damn those graphs look scary..there wont be a crash but an nuclear bomb detonate when sh**t start to hit the fan :)
there are no money in these assets...it just debt nothing but debt
 
Hello,

11 rises is 2.75, hope you do a better Job filling out property contracts.

Good luck with your plan.

I think its destined to fail.

Cheers.
 
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