Property

[crackaton]

House prices up again:

February 24, 2006 - 11:41AM

Housing prices are staging a comeback across the country, new figures show.

The Australian Bureau of Statistics said the price of housing in the nation's capital cities rose 2.1 per cent during the December quarter.

Over the past 12 months, prices in the cities were up 2.3 per cent.

During the quarter, prices rose 6.6 per cent in Perth, 6.1 per cent in Darwin, 2.3 per cent in Melbourne, two per cent in Brisbane, 1.8 per cent in Hobart, 1.1 per cent in Adelaide, one per cent in Sydney and 0.9 per cent in Canberra.

Over the full year, prices were up a whopping 23.2 per cent in Darwin, closely followed by Perth (up 22.5 per cent).

Price rises in other cities were much more moderate. They rose 5.4 per cent in Hobart, 3.5 per cent in Brisbane, 3.4 per cent in Adelaide, 2.9 per cent in Melbourne and 0.8 per cent in Canberra.

Sydney house prices fell 3.9 per cent.

AAP

Great stuff!!!

 

[wayneL]

Insane!

 

[crackaton]

Why?

 

[markrmau]

Why?

Just out of interest, why not work out the net yield of a rental property.

I mean the real net yield - after you take out council rates, property taxes, waterboard charges (-water usage which tennants are required to pay), + plus a figure for maintenance.

Then compare that figure with a stock yielding the same amount.

What capital appreciation rate is implicit in property prices when compared to the risk free rate of return?

 

[wayneL]

1/ house price/wages ratio cycle

2/ interest rate cycle

3/ sociological effect

4/ current debt levels

5/ etc etc etc

We are at the outer extremities of a > 2 sigma event in the hp cycle.

Watch this space. Time will tell.

 

[Smurf1976]

Great stuff!!!

Just like it's great news if petrol prices surge or bread and milk cost more. Good for some, bad for most and it's all just another sign of inflation seeping through the economy.

First time I've ever seen this, but my employer is asking for comment on whether the pay rise they have offered (without being asked by workers or unions) is high enough. About 13% on total pay in return for better conditions. That's in addition to the 3.5% they paid from 1st January and the other increases they've already agreed to for next year which was the full extent of the current agreement. Employers offering higher pay when nobody asked? Inflation...

 

[crackaton]

But hang on. The RBA says inflation is under control and housing has cooled off enough. What's going on? Is the economy over heated? Are the books cooked? Is Mr Costello the slime bag that everyone makes him out to be? Has Johnnys head got too big?

 

[crackaton]

Just out of interest, why not work out the net yield of a rental property.

I mean the real net yield - after you take out council rates, property taxes, waterboard charges (-water usage which tennants are required to pay), + plus a figure for maintenance.

Then compare that figure with a stock yielding the same amount.

What capital appreciation rate is implicit in property prices when compared to the risk free rate of return?

That's our marvellous tax system at work!! we get taxed on what we buy, we get taxed on what we earn, we get taxed and taxed and taxed... and for what?

To support idiots in power who have not got a clue, both at state and federal level.

I did not really like Packer, nor any of his kin, but he was correct in saying that any Australian who pays tax is a mug.

 

[crackaton]

Seriously though if we got rid of the BS tax system in this country just think of how many number crunchers and lawyers would be out of work.... the mind boggles.

Think I might go and buy myself an accounting or law degree. LOL

 

[Smurf1976]

I'm quite happy to pay taxes to fund useful things such as schools, libraries, roads, hospitals and so on. We all benefit from them either directly or indirectly and I believe absolutely that everyone should have access to health care, education etc regardless of ability to pay. That's a requirement of a fair and just society in my opinion.

But I object strongly to paying taxes that are simply wasted. Consultants being a prime example. Having seen it from the inside, I will NEVER believe that any consultant funded by my taxes is worthwhile unless they're either actually doing the work in a physical sense (including office work) or are providing specific, specialist advice. And then only if it's for a short period. When consultants are engaged to "review" something they are usually told the answer and won't be hired again if they don't go along with it and provide the justification, however insane, for the decision which has already been made. A complete waste paying someone to justify what is usually the wrong decision to start with (if it was right then why do you need someone to justify it?).

Outsourcing is another one. No doubt there are some successful examples but in general we end up with government employees running around after whoever is doing the actual work in order to get it done to the standard for which we are paying. And with all these extra levels of administration plus the reality that the contract price is usually no lower than doing it "in house" the end result is paying more to get less or, at best, paying the same to get less. Complete waste.

From what I've seen (on the inside), there is a substantial difference between the two major parties on this issue. Suffice to say that meeting union demands tends to be cheaper than paying literally three times as much to outsource in the name of supporting private enterprise. The resultant need for higher taxes means it does more harm than good for business whilst getting rid of government jobs in the process. Reducing the number of government employees doing physical work (as opposed to administration) only brings benefits if it actually saves money. If it costs more to get the work done by contractors than employing people to do it (due to scale issues, specialisation, government gets better deals from suppliers etc) then it's lose, lose and lose again except for the owners of said businesses on the receiving end of government handouts (sorry, "contracts").

As for paying tax to be lectured by the government via expensive advertising campaigns...

 

[crackaton]

It's a vicious circle. I agree largely with what you say. Taxes for essentials like infrastructure etc. ok. The rest is just sponging.

 

[wavepicker]

Why?

this not "great stuff" it is really "scary stuff". So many people caught up in this insane property trend. Personally, most of my friends have investment property mortgages ranging from 500K to 900K. These days being heavily in debt is really trendy. They make me feel like an idiot because I exited all my property investments 2 years ago. Their argument is, "if you don't buy a home now, then you will never be able to buy one". "This is your last chance to buy" they say. More than likely this is probably their last chance to sell.

I just hope for many peoples sakes it does not turn out the same as Japan and Hong Kong did, the last 15 years.

 

[Duckman#72]

It's a vicious circle. I agree largely with what you say. Taxes for essentials like infrastructure etc. ok. The rest is just sponging.

Better get used to it boys. Private enterprise is slowly dying. The government won't be happy until all the workforce are public servants. Smurf mentioned increased payrise - not good. Economic cycle is exascerbating the problem that employee have too many rights. The employer/employee see-saw has tilted too far back in favour of the employee.

Duckman

 

[wayneL]

"This is your last chance to buy" they say. More than likely this is probably their last chance to sell.

:iagree: Yes indeed!

 

[Smurf1976]

Better get used to it boys. Private enterprise is slowly dying. The government won't be happy until all the workforce are public servants. Smurf mentioned increased payrise - not good. Economic cycle is exascerbating the problem that employee have too many rights. The employer/employee see-saw has tilted too far back in favour of the employee.

Duckman

The thing which really surprised me, and everyone else it seems, was that the pay rise offer came out of nowhere with no strings attached as long as we agreed to be paid more for doing the same work. Only significant condition is that we don't get over worked in terms of hours due to safety concerns. Hardly an onerous condition.

One of my colleagues made the comment that they've never seen this happen before. Pay rises sure, but only because either employees asked, went on strike (or threatened to), started leaving or the union became involved. But this came out of nowhere straight from management. Since when did management of any employer simply decide to offer more money without being under obvious pressure to do so? Either they've become worried that people might leave or they are worried that we might ask for an even bigger pay rise than the one they're offering so thought they had better get in first.

It's great news personally but I'm more than a bit worried that it's the start of a trend which is bad news for the general economy. I've heard of other employers offering big (around 20% in one hit) pay rises recently too.

The way I see it, inflation is starting to emerge practically everywhere. My neighbour found an old gas bill (delivered LPG not mains natural gas) from 1992. The rate charged now is 94% higher than it was in late 1992. Average houses (Hobart) are up more than 100% in 5 years. Petrol is up, food is up, electricity has just gone up over 4% in Tas, bank fees have increased very substantially in recent years, it's on the news today that health insurance is going up yet again (over 5% from memory but I could be wrong on the %). Everywhere I look I see inflation. The only things that don't seem to be rising are imported or subject to direct competition from imports (cars, consumer electronics etc). But if the Australian Dollar falls then they'll be going up too.

So I think the RBA will have to be hiking interest rates the moment the Australian Dollar shows any real signs of weakness. It's trending down slowly at the moment but the commodities boom and the carry trade are presumably providing support. If commodity prices fall or overseas interest rates continue to rise (which seems increasingly likely) then we could have a problem. Higher rates are the worst possible news for the property market...

 

[Smurf1976]

http://www.abc.net.au/news/newsitems/200602/s1577382.htm

The Mortgage Industry Association of Australia and BankWest have questioned 500 households to compile their annual Home Finance Survey.

"Interest rates is the key issue on people's minds, in terms of their future ability to pay off their mortgage. The cost of petrol is there, but it's fifth of the list."

I wonder what's at 2, 3 and 4?

 

[wavepicker]

The thing which really surprised me, and everyone else it seems, was that the pay rise offer came out of nowhere with no strings attached as long as we agreed to be paid more for doing the same work. Only significant condition is that we don't get over worked in terms of hours due to safety concerns. Hardly an onerous condition.

One of my colleagues made the comment that they've never seen this happen before. Pay rises sure, but only because either employees asked, went on strike (or threatened to), started leaving or the union became involved. But this came out of nowhere straight from management. Since when did management of any employer simply decide to offer more money without being under obvious pressure to do so? Either they've become worried that people might leave or they are worried that we might ask for an even bigger pay rise than the one they're offering so thought they had better get in first.

It's great news personally but I'm more than a bit worried that it's the start of a trend which is bad news for the general economy. I've heard of other employers offering big (around 20% in one hit) pay rises recently too.

The way I see it, inflation is starting to emerge practically everywhere. My neighbour found an old gas bill (delivered LPG not mains natural gas) from 1992. The rate charged now is 94% higher than it was in late 1992. Average houses (Hobart) are up more than 100% in 5 years. Petrol is up, food is up, electricity has just gone up over 4% in Tas, bank fees have increased very substantially in recent years, it's on the news today that health insurance is going up yet again (over 5% from memory but I could be wrong on the %). Everywhere I look I see inflation. The only things that don't seem to be rising are imported or subject to direct competition from imports (cars, consumer electronics etc). But if the Australian Dollar falls then they'll be going up too.

So I think the RBA will have to be hiking interest rates the moment the Australian Dollar shows any real signs of weakness. It's trending down slowly at the moment but the commodities boom and the carry trade are presumably providing support. If commodity prices fall or overseas interest rates continue to rise (which seems increasingly likely) then we could have a problem. Higher rates are the worst possible news for the property market...

You have some really interesting and valid points there smurf. In so far as interest rates go, it is very difficult to determine the long term future. Perhaps to look back in history and see what has happened under similiar conditions in other economies might offer some sort of clue. Firstly in Japan 16 years ago, after a tremendous run up in property and stock values, the Nikkei started plummeting. The Bank of Japans response was so cut rates aggressively. All this did was delay the property bubble from deflating like that of the stock market by about 1-2 years. Then with close to 0% interest rates it followed suit, sending the nation into a deflationary spiral it is still comimg to grips with.

Six years ago in the US with the dot.com bubble exploding, the Federal reserve slashed rates in a similiar way. All this did was fuel a new bubble in the property market.

Just on inflation though, obviously property prices and the pace of inflation are way out of sync. For example, average price increases of following in the last forty years will show that:-

Average Grocery bill: +1000%
Average family car: +1500%
Average wage: +2000%
Averge Home: +10,000%!!!!