House prices to stagnate for 'years'

[krisbarry]

When you can buy a house in London or New York for a cheaper rate than many Australian cities then we as a community are farked!

House cost nearly worst in world

HOUSING affordability in Australia is among the worst in the world, a further sign that many state and local government polices are inappropriate, the Residential Development Council said.

It said today's release of the Annual Demographia survey rated every Australian city as "seriously" or "severely" unaffordable in a global study of 159 cities, with Sydney, Melbourne, Perth and Hobart among the worst 25 cities.

The Residential Development Council, the residential policy arm of the Property Council of Australia, said Australia's poor result was proof that the current policy mix was a toxic cocktail for housing affordability.

"We have four of our cities in the worst 25 when it comes to affordability – surely the message must get through?" said RDC Executive Director Ross Elliott.

The Demographia Survey, released by the US-based Wendell Cox Consultancy, attributes restrictive land release policies and excessive regulatory and zoning controls, combined with high housing taxes, for the Australian problem.

The Demographia survey rates housing "unaffordable" when the median house price passes three times median household incomes.

Housing is "seriously unaffordable" when it passes four times median household incomes and "severely unaffordable" when it passes five times median household incomes.

The least affordable Australian city is Sydney – where median prices are 8.5 times median incomes – even worse than London at 8.3 times incomes and New York at 7.2 times incomes.

"We have maintained that there are three things largely responsible for the worsening housing affordability in this country. Inappropriate land release policies, excessive housing taxes and unfair infrastructure charges, and dysfunctional systems of development assessment," Mr Elliott said.

"This report now confirms the magnitude of the problem in this country – where with abundant land, there is no excuse for our housing crisis other than bad public policy."

 

[krisbarry]

Anyway since the 1st of January 2007 I have traded well and dumped another $1,000 into my superannuation.

Fark buying a house in Australia, might as well buy one in New York!

What a bloody joke Australia has 20.5 million people, how many does New York have?

 

[theasxgorilla]

Anyway since the 1st of January 2007 I have traded well and dumped another $1,000 into my superannuation.

Fark buying a house in Australia, might as well buy one in New York!

What a bloody joke Australia has 20.5 million people, how many does New York have?

About the same, but they live in little shoe-box apartments. Unfortunately the TV-show Friends did not map so close to reality.

 

[Rafa]

well, one thing is for sure, we have abundant land...
EXCEPT not much of it has the infrastructure in place to make in 'developable'.

as govt's have pretty much passed the costs of infrastructure onto developers, cost price of land blocks is pushing 100k, and that pretty far out from the city... add 150k to build, thats 250k cost price.

land was cheap in the past cause the taxpayer subsidised it...
that needs to return if there is any hope for land prices to fall.

until then, house prices will remain high...

the other way house prices will fall is if there is a major recession... at that time, while prices will fall, housing affordability is not guaranteed follow suit.

 

[theasxgorilla]

House cost nearly worst in world

HOUSING affordability in Australia is among the worst in the world, a further sign that many state and local government polices are inappropriate, the Residential Development Council said.

This is propagana. Australia, Canada, Republic of Ireland, NZ, UK and USA is not "the world". There are 700 million people in continental Europe for starters with cities like Oslo, Copenhagen, Moscow, Zurich, Paris and Milan. What about Asia? Tokyo, Hong Kong, Singapore?

It's not just about housing BTW. There are other cost-of-living factors that will affect whether you can afford to save for and hold onto a house. For cost of living Sydney rates 19 and Melbourne comes in all the way down at 74. Perth, Brisbane and Adelaide are 93, 99 and 108 respecitively.

http://www.finfacts.ie/costofliving.htm

You are not disadvantaged by being in Australia. Go travelling. Exposure to the big picture might help your perspective.

 

[Rafa]

This is propagana. Australia, Canada, Republic of Ireland, NZ, UK and USA is not "the world". There are 700 million people in continental Europe for starters with cities like Oslo, Copenhagen, Moscow, Zurich, Paris and Milan. What about Asia? Tokyo, Hong Kong, Singapore?

It's not just about housing BTW. There are other cost-of-living factors that will affect whether you can afford to save for and hold onto a house. For cost of living Sydney rates 19 and Melbourne comes in all the way down at 74. Perth, Brisbane and Adelaide are 93, 99 and 108 respecitively.

http://www.finfacts.ie/costofliving.htm

You are not disadvantaged by being in Australia. Go travelling. Exposure to the big picture might help your perspective.

Exactly...i've been all over the world...
there is NO place like Oz...

Also, if cost of houses were so expensive, tell that that to the poms who are flocking here in their 10's of thousands and buying houses outright for cash.

i am not saying that house prices here won't fall, but you can't compare the average house prices in say Sydney to that of London, when in London, the avg house is 50sqm of living space on the third floor of a 100yr old building, and here its 200sqm of apartment, or more likely a free standing house on a 500sqm block... (at the very least)

 

[krisbarry]

But Rafa, you bought at the top of the housing market and paid something like $400,000 for a house in Adelaide, since that time there have been at least 4 interest rate rises and a flat housing market.

How are you travelling now?

You must be just breaking even with your purchase price, 1 more rate rise might place you in negative equity...pretty scary if you ask me

 

[Rafa]

that is true, i did...

houses around me, and worse than mine are now selling for 450k!
this is backed up by the sunday mail two weeks ago (you probably saw that...)... my suburbs median has gone from from 360 to 420)...

The thing is, I am not an investor in the property market, so for me, the 400k was money well spent on a place i like, in an area i like... on a house i like...

If the prices don't go up for the next 10 years, i'll be happy...

As it is, i am NOT happy at all with prices going up, cause that will puts my bloody council rates up!

All things considered, as a place to live, 900sqm block, with swiming pool, ensuite, SOLID BRICK, etc... i consider the price i paid a fair price.

 

[krisbarry]

Never compare houses around you, you must compare what the market is willing to pay!

 

[Rafa]

that is true...
the reality is you don't know what your house its worth, till you put it on the market... rather different to shares in that regard.

but, since i don't intend selling for quite a while, i guess i won't know for quite a while what it will be worth...

as there is no compelling reason to move in the forseeable future, i guess we won't know the answer to that for quite a while.

Am i worried about it.... NO WAY!!!!

Cause i my place falls to say 200k, there is a good chance the place i am looking to move into will have fallen by 50% as well...

It took me a long long time to realise this above fact... Once i did, i had no hesitation in buying the first home as soon as i found the right one.


Now Investment property is a completely different ball game...
But that shouldn't stop you from owning your own home to live in, if that is what you want.

 

[theasxgorilla]

Never compare houses around you, you must compare what the market is willing to pay!

If you're not going to compare to houses around you, what would you compare to? For lender valuation purposes this is EXACTLY what happens.

I agree with what you're getting at though, and for that reason it's impossible to know the value of your house, for sale purposes, until you have accepted a written offer and the cooling off period has expired.

But over several months you might get offers that vary by as much as 10% (or more to the downside if someone is really trying to screw you or to the upside if someone really wants to buy your property).

The one you choose to accept is the one that gets recorded in the median house price stats. If you let the tabloid articles cause you to panic and accept the lowest offer then all the ballyhoo about interest rate rises becomes a self full-filling prophecy. On the other hand you keep your nerve and wait until you receive a fair market value offer then great, at least you weren't a casualty of all the scare mongering.

Real estate is not like the share market and for this reason median house price statistics or lender valuations have limited meaninig when it comes to actually transacting a property.

 

[moses]

The one you choose to accept is the one that gets recorded in the median house price stats. If you let the tabloid articles cause you to panic and accept the lowest offer then all the ballyhoo about interest rate rises becomes a self full-filling prophecy. On the other hand you keep your nerve and wait until you receive a fair market value offer then great, at least you weren't a casualty of all the scare mongering.

Real estate is not like the share market and for this reason median house price statistics or lender valuations have limited meaninig when it comes to actually transacting a property.

Beg to differ.

Median prices are extremely resistant to noise. For example, a one off fire sale is unlikely to influence the median price by even $1, although it will affect the average price. This is because the median price is determined from the middle of the range of prices and is not influenced by data at the edges.

The median house price falls only when most houses are selling for less.

 

[jkool]

Now Investment property is a completely different ball game...
But that shouldn't stop you from owning your own home to live in, if that is what you want.

I think that is what it comes down to. If you are buying for yourself a place to live, your motivations are completely different compared to buying an investment property.
Since you are going to live in that place yourself, of course your decision is more emotional than if you were to rent that same place out.

The place you are going to live in needs firstly satisfy the requirements of your standard of living (pools, garden, proximity to you favourite golf course etc), the price you pay comes way down the list. Therefore you should not worry where it goes as long as YOU think you did pay fair price for what you got.

For an IP the situation is completelly different - the question of price comes first and foremost as in any other investment.

 

[jkool]

Beg to differ.

Median prices are extremely resistant to noise. For example, a one off fire sale is unlikely to influence the median price by even $1, although it will affect the average price. This is because the median price is determined from the middle of the range of prices and is not influenced by data at the edges.

The median house price falls only when most houses are selling for less.

I think this is incorrect. Actualy the problem with median prices is exactly that - being influenced by the edges. Median price is the middle value from all the sales regardless of how many houses sold at each particular price (eg. if one house sells for 10 and ten houses sell for 1 the median price is still 5).

Well at least thats how I understood it until now

 

[theasxgorilla]

Beg to differ.

Median prices are extremely resistant to noise. For example, a one off fire sale is unlikely to influence the median price by even $1, although it will affect the average price. This is because the median price is determined from the middle of the range of prices and is not influenced by data at the edges.

The median house price falls only when most houses are selling for less.

Maybe I wasn't clear as I didn't mean to suggest that one "fire sale" would affect the median house price in and area per se.

My key statement still stands: median house price statistics or lender valuations have limited meaning when it comes to actually transacting a property. I don't want to overwhelm the thread with statistical analysis, instead this guy explains it well enough for those that are interested:

"Median Home Prices Are Bogus"

http://www.azcentral.com/blogs/inde...us&more=1&c=1&tb=1&pb=1&blogtype=PhxPluggedin

 

[Smurf1976]

Beg to differ.

Median prices are extremely resistant to noise. For example, a one off fire sale is unlikely to influence the median price by even $1, although it will affect the average price. This is because the median price is determined from the middle of the range of prices and is not influenced by data at the edges.

The median house price falls only when most houses are selling for less.

The median price is heavily influenced by WHAT is selling as well as the price.

It is entirely possible for the median price to rise whilst acutal house prices fall if the quality of the houses selling is increasing. Indeed that is exactly what's been happening in areas experiencing a slowdown - the poorer quality properties fail to sell thus leading to an increased quality for the "average" property that does sell. No surprise that this quality increase in the statistics hides the true fall in prices for the SAME house.

It's a bit like concluding that the cost per kilometre of travel has increased without mentioning that you switched from the bus to a Rolls Royce. The actual cost of travel by the SAME means could have halved but due to quality changes your statistic will show an increase.

If you want to keep an eye on house prices then IMO the only valid way to do it is to compare prices for VERY SIMILAR houses (on very similar blocks of land) in the SAME area over time. For example, I have been tracking the price of 13 sq brick 3 bed houses on minimum 600m2 land without unusual views or features in selected Hobart suburbs for 3 years. I have also tracked the price of 11 sq 3 bed weatherboard houses on minimum 500m2 land and of 14sq+ 3 bed brick houses with 2 bathrooms, quality fittings etc in those same suburbs. On the basis of my research I know that the price has fallen and that the trend remains down for the types of property that I have tracked. It may well be a different situation in other suburbs, for different types of properties etc.

 

[wayneL]

Exactly...i've been all over the world...
there is NO place like Oz...

Quite.

But there is no place like England, there is no place like Canada, New Zealand, the USA, Mexico, France etc etc etc.

Australia is only special to people who like it... many think it's a muckhole

Also, if cost of houses were so expensive, tell that that to the poms who are flocking here in their 10's of thousands and buying houses outright for cash.

This is due to the current overvaluation of the pound. For some balance, there are 10's of 000's of Aussies flocking to the UK as well. In fact there are 200,000 Aussies living in the UK.

i am not saying that house prices here won't fall, but you can't compare the average house prices in say Sydney to that of London, when in London, the avg house is 50sqm of living space on the third floor of a 100yr old building, and here its 200sqm of apartment, or more likely a free standing house on a 500sqm block... (at the very least)

This does have some validity, but there are other factors balancing this.

Again for balance. We recently sold some acreage with a house near Horsham (half an hour from London by Train). Acreage properties near Perth are comparable in price. WTF? This is ludicrous! If you want to play around with a couple nags, would you prefer to ride them at Wembley against international competition if so desired, or against 4 brumbies in a dustbowl at Muchea?

Property should be cheap here!!

 

[tech/a]

Quite.

But there is no place like England, there is no place like Canada, New Zealand, the USA, Mexico, France etc etc etc.

Australia is only special to people who like it... many think it's a muckhole

I'm with Rafa.
We rent apartments in Adelaide often to UK guests and mosstly in Summer peak at $1200/week. They think its cheap. In the 3 yrs we've had them 3 guests have either applied to reside or are in the process. There are places in the US I would live, Europe,and Canada but even so cant go past AUST.
NO PEOPLE. well very few.

This is due to the current overvaluation of the pound. For some balance, there are 10's of 000's of Aussies flocking to the UK as well. In fact there are 200,000 Aussies living in the UK.

Few own homes there though. The average wage on balance isnt much more than the Aussi average.25-30000 Pounds.

This does have some validity, but there are other factors balancing this.

Again for balance. We recently sold some acreage with a house near Horsham (half an hour from London by Train). Acreage properties near Perth are comparable in price. WTF? This is ludicrous! If you want to play around with a couple nags, would you prefer to ride them at Wembley against international competition if so desired, or against 4 brumbies in a dustbowl at Muchea?

Property should be cheap here!!

Acerage 30 mins from London.
Well friends sold 1.5 acres with a 3 bed home 150 yrs old 1 hr out of London---Barnet for $2.5 Million Pounds dont tell me an acerage 30 mins from London is comparable to Perth 30 mins out!!

Those trying to time an entry into the property market will still be trying in 10 yrs time.

 

[The Red Baron]

I understand what you mean Smurf regarding the poorer quality houses failing to sell.

I've noticed in Perth the last 3 months its the cheaper suburbs (where you could get $150K house and land package 3 years ago) taking up the majority of the paper, and it seems to be increasing.

The nice beachside properties and ones in good locations still seem to be going along strong. I know a few people looking at offloading their Investment properties and moving to these suburbs.

 

[moses]

I think this is incorrect. Actualy the problem with median prices is exactly that - being influenced by the edges. Median price is the middle value from all the sales regardless of how many houses sold at each particular price (eg. if one house sells for 10 and ten houses sell for 1 the median price is still 5).

Well at least thats how I understood it until now

In tyour scenario the median value is 1 and not 5.

Look at at like this:-

1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 10

what number appears in the middle?

1