The future of Australian property prices

[trainspotter]

You going Cup ?

me too

Robots what you doing professorbro?

Maybe ?????? LOLOL ...... now that would be a very bad thing at the Cup. The Trainman and the Nun on the prowl with a Professor under our wing. OH OH ........ It's Danger Island !

Back on topic. My link to the ABS website on my previous post does not worK? Error 404 I believe? 70% home ownership for the last 40 years and STABLE. Only 12.5 million people in Australia in 1970 and they all had the SAME issues we have now. Interesting to note tht the population of Australia rises approximately ONE MILLION people per every 5 years. SO therefore 200,000 new people looking for a home per annum. Breaking it down even further this requires at a rate of 70% home ownership takeup value ....... 140,000 owner occupied homes every year for the last 40 years. Hmmmmmm ???

All this happened through deregulation of the banking system, stock market crash in 1987, oil wars, missile crisis, no China to trade with, Asia crisis 1998, Nixons 1971 refusal to redeem dollars for gold, Currency fallout and just about every other damn thing you can throw at this "alleged" house of cards waiting to tumble.

Yes, yes, yes the rest of the worlds real estate has taken a tumble but they were using a different model. High risk debt ratios, NINJA loans, country of origin in massive debt and ripe for a correction, unscrupulous developers, blah blah blah and yadda yadda yadda.

This thread reminds me of the 3 little pigs. We all know the story don't we? It would appear that Australia has built their home out of bricks. Yes, we are going to lose a few tiles off the roof and yes the market is slipping sideways. NO QUESTION. It has happened before, it will happen again. No biggy.

Everyone is RAVING about affordability. LOL. Try getting a housing loan in 1989 when IR's were at 17%.

And the old chestnut - House price to income ratios. These measures typically suffer from a range of shortcomings, including the fact that they ignore non-capital city regions. Nearly 40 per cent of homes are located outside of the capital cities. They also only examine wages as opposed to “household incomes”, and frequently restrict the analysis to detached, or greent titled homes when one quarter of all homes are semis, terraces, and apartments. Slightly flawed data.

But you knew all of this didn't you?

 

[kincella]

good to see some friendly banter on this forum ...for a change....
I will look forward to catching up with Robots, and friends, in our fav place at some stage...in Chapel st....

about the horse races.....
I like the big races...not the crowds, and my focus is on the horses....to photogragh them etc....I prefer the lead up races to the Melb cup, especially the WS Cox plate....I believed it would be a history making race yesterday with that outstanding stallion So you think racing ( I never believed the Sydney horse had a chance).....
I had intended to drive back from the country to go and see this magnificent horse in the flesh....
persuaded not to go, due to the big crowds....
so I went to the local races instead....
boy what an eye opener that was...guess the poor attendance and low prize money has something to do with TAB interference and NSW govnut, a few years back....
in a nutshell, it looked like a bunch of ferals, no one dressed up, most were hovering around the booze or the betting, the horse trainers and attendants looked like they were in their dirty work clothes.... no big deal for race day...
prize money was only $10,000 first prize.....
I would think it would cost around $1500 or so a week to keep a horse in training....so the prize money would hardly cover costs for most horses...
anyway, I am unlikely to go back to a country meeting now.....it is so different to what they were like in the past.....it was a huge eye opener to what was once a stunning day out.....just another case of cutting off funding for regional Australia...and put it all in the city...( I could be very wrong, but something has gone badly wrong here)
back on topic.....otherwise I am loving this part time country living, no great travel problems, plenty of affordable housing......
and the local tradesmen are too busy.....earning their $100-$200 k's, so one has to wait a few weeks or longer to get any jobs done.....not aware of the 4 month waiting program, as it was a few years ago up here....I think we have more tradesmen to address that problem now.....
I am rather surprised by the extent of wealth up here too.....I guess this area has grown and developed much faster in the past couple of years.....faster than I ever imagined
I now need to open my eyes a bit more, take a closer look at what is driving this area.....or I am spending too much time up here....
just an easy 3 hours drive from house to house.....I could live in both places
you do get a bigger house for your bucks up here....or out in any regional area, compared to the city....
cheers

 

[Gerkin]

Asset Allocation and Divirsification

I am a big believer in divirsfying assets based on asset classes but also in respect to the divirisification within that class. Take shares as an example, consmer discretionary, staples, financials,lpts, exploration etc etc, same as property and fixed interest.

What i believe alot of people get wrong as they are guided by there own feelings is that they believe that one asset class is better than another, eg property investors buying only residential in the same area, or share investors buying only shares and ignoring the property market.

There are alot of people, young professionals in my opinion who throw all their cash at shares and by the time they hit say 33, they are renting in inner city 2 bedroom apartment, own no property whatsoever, and have a share portfolio worth xxx.

Now they have missed out on 10 years of property gains and are still renting
Can anyone see whats wrong here. These intelligent people who invest in the stockmarket have not bought an property, I see smething really wrong here.

Now, what these people should of done - saved for 12 months, bought a joint say at 90%lvr, pay interest only to keep it neat and repaymets jst over rent levels and then invets in the market.

I would like to hear peoples tories in respect to there or people they know who do something simialar or have done it themselves and has it worked, has it not worked.
.

 

[mazzatelli]

Now, what these people should of done - saved for 12 months, bought a joint say at 90%lvr, pay interest only to keep it neat and repaymets jst over rent levels and then invets in the market.

I politely disagree. Young people should try to excel themselves in their chosen career paths or businesses [if self employed] before taking on an obligation that gives little chance of manoeuvrability.

I've seen friends who wanted to study further or open a business but could not do so since they were tied to an investment property. Before they knew it - kids, family and a dead-end in career prospects stared them in the face.

 

[prawn_86]

I would like to hear peoples tories in respect to there or people they know who do something simialar or have done it themselves and has it worked, has it not worked.
.

Where we live it is a lot cheaper to rent than it would be to own the property by the time you took interest, costs, maintenance tec etc.

We simply invest the difference (plus more) into shares. At our age early 20's, there is no point tying ourselves down with a large long term loan that leaves us with few options should we need to move cities, overseas, travel etc etc

 

[Dowdy]

I politely disagree. Young people should try to excel themselves in their chosen career paths or businesses [if self employed] before taking on an obligation that gives little chance of manoeuvrability.

I've seen friends who wanted to study further or open a business but could not do so since they were tied to an investment property. Before they knew it - kids, family and a dead-end in career prospects stared them in the face.

I agree. I didn't waste my money in buying a home.

I'm happy to live with my parents in the meantime.

I started my own home based ebusiness which has grown 300% in one year.

Also the money i saved from not buying a home, I invested in silver bullion and just look at how well the price of silver has done this year...

If I was locked into a mortgage, I would of lost several freedoms, like travelling to the USA for 3 months, which has been the best time!
Back home in a few days

I will eventually look for a home, although I have my eyes set on an industrial lot for my business but will wait until I have at least a 40-50% deposit and until the value of property is 4x my income

 

[trainspotter]

Left home at 16. Purchased my first home at 21. Paid it off when I was 25. Used this to leverage into other properties (rental, developments and commercial) Travelled extensively around Australia. Did not get into shares until I was 35. Would I jump in the Hot Tub Time Machine and change anything I did? NO WAY ! I would have bought more property if I could.

Now this worked for me. Does not mean it will work for you. Everyones circumstances are different. If you can stay at home and live with your parents and create an ebusiness. Good for you. If you can rent at a cheaper rate than buying property in CBD Sydney then good for you as well.

Do what you know best that works for you. Stick to your core business.

 

[robots]

hello,

good to see Kincella on today,

anyone catch the article in the Sunday Age about the "foreign buyer" issue the other month, hehehehehehehe

ANOTHER FALSE ONE

oh well, beautiful day again

thankyou

professor robots

 

[Gerkin]

Where we live it is a lot cheaper to rent than it would be to own the property by the time you took interest, costs, maintenance tec etc.

We simply invest the difference (plus more) into shares. At our age early 20's, there is no point tying ourselves down with a large long term loan that leaves us with few options should we need to move cities, overseas, travel etc etc

thats the way i used to think too, renting in the inner city.
what about 10km out from the inner city when your yield starts to look more attractive and would cover the mortgage when coupled with depreciation if you had to travel,move cities etc?

ive seen it many times that the more financilay successful person in there ealry thirties has had a home for about 10 years

 

[electronicmaster]

This thread is looking too much like a Ponzi scheme these days.

 

[Agentm]

hello,

good to see Kincella on today,

anyone catch the article in the Sunday Age about the "foreign buyer" issue the other month, hehehehehehehe

ANOTHER FALSE ONE

oh well, beautiful day again

thankyou

professor robots

lol

its very curious how its done.. you dont have the buyer evident in the auction, there are ways to get around it later..
i dont think these guys are on the front line at the auction, its a process very much done in very clever ways..

i tend not to believe everything i read in the press..particularly the sunday editions, they are the lowest of lows..

but i do know the way its done is not evident to those investigating.. thats for sure..

 

[explod]

This thread is looking too much like a Ponzi scheme these days.

When the number one hangman adds the scalps to his belt list is it any wonder.

 

[prawn_86]

thats the way i used to think too, renting in the inner city.
what about 10km out from the inner city when your yield starts to look more attractive and would cover the mortgage when coupled with depreciation if you had to travel,move cities etc?

ive seen it many times that the more financilay successful person in there ealry thirties has had a home for about 10 years

We live about 6k's from the city and love the lifestyle we have. Place next door (exact same floor plan) just sold for 450k this week. We pay $360 a week rent, doesnt even cover 2 thirds of the mortage (assuming 7%pa loan), then take into account costs (have had new blinds, hot water system and dryer this year), body corp etc plus trying to pay of the principal of the loan...

I also think certain inner city areas may begin to plateau. Im not against property just at this stage of our lives dont want to be invested in only one assett class with low liquidity and hgh entry/exit costs, and have to take huge leverage to gain entry into that asset.

If we were to buy property it would be as an investment, not a PPOR, and certainly wouldnt be inner sydney

 

[Mofra]

Now, what these people should of done - saved for 12 months, bought a joint say at 90%lvr, pay interest only to keep it neat and repaymets jst over rent levels and then invets in the market.

I would like to hear peoples tories in respect to there or people they know who do something simialar or have done it themselves and has it worked, has it not worked.
.

Buying property as investment only, renting myself and investing in shares (with the odd bit of net-credit derivative spread fun when the numbers add up) is my strategy and I'm more than satisfied. I really don't know many people who choose only one asset class anyway, save for owner occ purchasers in the first few years of ownership.

 

[againsthegrain]

Is it just me or have people missed the key piece of info, back when he bought the house and paid it off in 5 or 6 years it was possible, house prices and wages were a much closer ratio. Good for him back then, but now for a young person in early to mid 20s it is more of a 20 - 30 year prison term.

I am in my mid 20s and I see too many opportunities around that would be closed off instantly with going into a mortgage, if every buying a property my plan is to enter with no less then 70% deposit and I see it as a realistic goal

 

[prawn_86]

Is it just me or have people missed the key piece of info, back when he bought the house and paid it off in 5 or 6 years it was possible, house prices and wages were a much closer ratio. Good for him back then, but now for a young person in early to mid 20s it is more of a 20 - 30 year prison term.

I think it does depend on where you live and where you buy.

Personally im not willing to commute for hours to get to work, so would never live in outer suburbs (although i may buy as an investment).

But yes, for me to buy the apartment where i live at the moment would cost 450k. Even if we put all our money into it and had no holiday etc the maximum we could pay off is 50 - 60k pa. Certainly not going to have it paid off in 6 yrs thats for sure

 

[KurwaJegoMac]

About 58 per cent of Brisbane residents with mortgages now meet the "stress test", up from 36 per cent a decade ago, according to a National Centre for Social and Economic Modelling. That tops the 56 per cent ratio for Sydney mortgage-holders, a level little changed over the period.
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Melbourne's ratio, meanwhile, has jumped to 53 per cent from 36 per cent, as the city's house prices surged.

Today, almost one in two first-home buyers, or 47 per cent, pay more than 30 per cent of their disposable income to housing in 2010, up from 43 per cent in 2000, NATSEM said.

http://www.theage.com.au/business/mortgage-stress-jumps-bites-brisbane-hard-20101025-16zlf.html

Mortgage stress over 50% already, at such historically low interest rates?

Wow....

 

[againsthegrain]

apparently thats paradise lol

 

[satanoperca]

This is a wonderful thread.

Have to agree with the rants of TS however even though I do believe that high property prices provide no benefit to our society.

No trigger has been pulled for property prices to drop yet :-
A) unemployment to rise, yes QLD may get hit with tourism and the dollar
B) Interest rates to get above 8%
C) the world to come crashing down due to the burden of debt.

Until I see one or all of the above being triggered can I see property prices retracing. Again, even a retrace of 10% is nothing in the grand scheme of price increases over the last few years.

Good luck to the bears but I think the bulls are still in control.

Cheers

 

[Beej]

But yes, for me to buy the apartment where i live at the moment would cost 450k. Even if we put all our money into it and had no holiday etc the maximum we could pay off is 50 - 60k pa. Certainly not going to have it paid off in 6 yrs thats for sure

Well that's not really the case, because you will likely find that as young professionals your income will increase a lot over the next 5 years or so. Also you are probably not allowing in your calculations that your interest costs would reduce every year as you pay more principle off. We could also have some periods of lower interest rates (also risk of higher of course). Bottom line is even at $50k-$60kpa coming off the principle, you would be done in 7.5-8 years - not bad. Allow for income growth and I bet you would be paid off in 6 years or less.

Imagine how great life would be then? You would be under or barely 30, and would not have to pay any rent anymore - maybe even never again for the rest of your life if you wanted? How much would you save then and how great would your lifestyle be? Your capacity to grow wealth by investing in other assets because you have property taken care of? Travel whenever you want, have kids and so on. You would also be hedged against general property prices over time in case you want to upgrade in the future.

Anyway - just pointing out that it might not be as bad an idea to take the leap as you might think. It took me 7 years to pay my first house off which I bought when I was 23 - so owned a house outright mortgage free by 30 - and was in the very situation described above - I have never looked back.

Cheers,

Beej