The future of Australian property prices

[MACCA350]

I note Porter Davis homes have $43000 for FHB's....enjoy

Where did you see that..........this from their website ends today.

 

[kincella]

their TV ad last night...$43,000 as I stated....note they have a new sales campaign starting 3.1.2010
the ad on the web site...for 32,000 ends 31.12.09
obvious they are adding another 11,000 to the booty

 

[MACCA350]

their TV ad last night...$43,000 as I stated....note they have a new sales campaign starting 3.1.2010
the ad on the web site...for 32,000 ends 31.12.09
obvious they are adding another 11,000 to the booty

Did they mention if it covers house purchases or just their house and land packages?

cheers

 

[Mc Gusto]

hello

thought you all may find this interesting, hope it is not a double post

http://www.economist.com/businessfinance/displayStory.cfm?story_id=15179388

Thanks

Gusto

 

[UBIQUITOUS]

their TV ad last night...$43,000 as I stated....note they have a new sales campaign starting 3.1.2010
the ad on the web site...for 32,000 ends 31.12.09
obvious they are adding another 11,000 to the booty

Lets me guess.......they increased build prices across the board by...........$11k?

An architect friend of mine pointed something out about these houses - Over the last couple of years the proportion of glass to brick has substantially increased because bricks cost more per area on cost and labour. When I had a look, he wasn't wrong. Soon they'll be offering greenhouses and calling them contemporary homes....

 

[Mofra]

thought you all may find this interesting, hope it is not a double post

http://www.economist.com/businessfinance/displayStory.cfm?story_id=15179388

Interesting article - just waiting now for someone to use it as an argument for the "chonically low rents" we pay in Australia

 

[Ozymandias]

An architect friend of mine pointed something out about these houses - Over the last couple of years the proportion of glass to brick has substantially increased because bricks cost more per area on cost and labour. When I had a look, he wasn't wrong. Soon they'll be offering greenhouses and calling them contemporary homes....

A very interesting observation. When you say you had a look, where? Does someone publish stats on this sort of thing?

I'm quite surprised by the lack of innovation in building techniques and materials for homes here in Australia. Especially here in the west, it's brick and tile / colourbond, or nothing. There are a number of materials that could cut down on build time and costs, especially for houses where the brickwork is hidden by render anyway...

 

[UBIQUITOUS]

A very interesting observation. When you say you had a look, where? Does someone publish stats on this sort of thing?

Homeworld Sydney. We went there to help out a mutual friend who was looking to build. I built a house a few years back and the same builder had the same homes on offer but with different facades. It was pretty clear to see what they were upto once I had it pointed out.

 

[MACCA350]

It was pretty clear to see what they were upto once I had it pointed out.

To some extent that is probably part of the motivation............but on the other hand lifestyles and people have changed over the years and I'd say larger window areas have also been driven by the consumers.

Look at a 90yo house and they are poky, dingy and dark due to few small poorly placed windows......the feeling you get in a place like that is not pleasant. Walk into current homes and the many well place large windows along with big glass sliding/bi-fold doors gives you a very different feeling. I know which I prefer to live in.

cheers

 

[satanoperca]

Macca, I think you will find the reason was not due to lighting but heat.

Back 90 years ago no central heating and cooling. Unless windows are double glazed they are poor insulators.

As the Europeans do, all windows should be double glazed but then the cost would be equal to brick.

All in all our building designs and technology are crap compared to the Japanese & Europeans.

Australians like Americans are more concerned with size than quality.

Larger windows have become popular due to cost. It is nice that houses have become more light filled but no good if your window is 1mtr from your neighbors.

I would like to see more production orientated building where homes are fabricated in factories giving greater efficiency and cost reductions while improving design.

Cannot believe we have seen more posts on how the market has dramatically turned around over the last year.

The only way is up for property, forget debt, let some else care for that.

Cheers

 

[satanoperca]

Doesn't look like investors are stepping in to replace FHB as being suggested by many.

The big squeeze is upon us.

Cheers

 

[UBIQUITOUS]

Doesn't look like investors are stepping in to replace FHB as being suggested by many.

The big squeeze is upon us.

Cheers

It doesn't matter. Somebody will be along soon with a story of how their mate's mother-in-law sold an IP somewhere at 12% above last year's value, and how this should be applied to the market as a whole.

 

[Beej]

Doesn't look like investors are stepping in to replace FHB as being suggested by many.

The big squeeze is upon us.

Cheers

We shall see - ABS figures (http://www.abs.gov.au/ausstats/abs@.nsf/mf/5609.0) up to Oct certainly show a flattening of housing credit growth over the past few months, so we are hitting the top of this part of the cycle. However ABS had been showing continued investor finance growth. The AFG figures are a different sort of sample and may have some biases in them as they are a mortgage broker - also Dec would be a "slow" month for housing finance (without any seasonal adjustment like ABS do) due to less selling weeks etc, holidays and so forth.

We can't expect to see 12% (Sydney), 17% (Melbourne) pa housing price growth every year forever! I expect (and have said so here many times) price growth in most cities to slow through 2010. I think Sydney will still grow maybe 5%, but most of the action will be in the mid range and top end, lower end properties (houses < $500k) may not see any growth (ie may even see small smalls on average) due to reduced FHB demand. Even if the investors move in, they will come in and pick up the softness rather than drive price growth in that segment IMO. Look at what happened in Sydney during 1992/1993, that's pretty much how I see it playing out through 2010/11.


Cheers,

Beej

 

[MACCA350]

Anyone notice this at the end of RP Data's latest press release?

**The median price is the 50th percentile observation based on all pooled home sales over the three months to end November 2009. This is different to the medians reported by other parties for several reasons. First, where appropriate it includes all property types (ie, not just detached houses, like the ABS). Second, the median value reported by the likes of APM is calculated using a ‘stratification technique’, which is different to the simple 50th percentile observation used here. RP Data-Rismark’s previously reported ‘median values’ must also be interpreted differently. These are the index values attributable to the RP Data-Rismark ‘hedonic index’, which was originally based at inception on median automated property valuation estimates (ie, the median of a statistical valuation of all capital city homes). The change in the index value over time reflects the underlying capital growth rates generated by residential property in the relevant region. These growth rates are not influenced by capital expenditure on homes, compositional changes in the types of properties being transacted, or variations in the type and quality of new homes manufactured over time. The RP Data-Rismark ‘median values’ are not, therefore, the same as the ‘simple median price’ associated with all homes sold during a given period. In future, we will report simple median prices to avoid any further confusion.

Seems they are changing their methods, wonder why?

cheers

 

[Go Nuke]

Well after much looking around Brisbane, my partner and I have decided to buy a block of land and build a new dwelling

We set ourselves a limit of about $410K so to hopefully not overextend ourselves. But don't get me wrong....$400K is still ALOT of money for the average person to repay!

We just couldn't find anything "nice" enough for that price anywhere near Brisbane or surrounding suburbs. Anyone who knows Brisbane will surely agree that $400K doesn't get you much of a house.

We decided that for that price we could get a brand new house and live approximately 20-25Kms from Brisbane CBD.

I will say though that I am concerned about rising interest rates and how FHB will go when they have been lured into the market with histocialy low interest rates and the FHB grant.
If FHB start to default on their morgages, couldn't that start a slide in property prices? or will investors just step in and buy them to rent back to them? (which I think would mean the gap between rich & poor would grow)

I know the banks have apparently tightened their lending and that they factor in rate rises (not sure how many though), but I reckon that wages/salaries have remained pretty stagnant lately due to the GFC.

I know the crap comapny I work for (Tyco) has frozen my wage for a second year running now and I'm earning below the national average (about $57K or something?) which will lead me to look for employment elsewhere once I have secured my home loan. And it seems Im not the only one. I think I heard something on the news last nigth about 78% of employees will be seeking new employment in 2010.....probably for the same reasons as me. We all know the cost of living waits for noone!

So....does anyone think that there will be a wages breakout this year with the economy "strong" and to keep up with rising rents/morgages?

I myself an also an investor, but is anyone else concerned about how their children, or their children's childen will afford housing in Australia in the future?
They most certainly WONT want to do the "menial" jobs like cleaning etc in this country if they ever want to buy a home.

 

[MACCA350]

but is anyone else concerned about how their children, or their children's childen will afford housing in Australia in the future?
They most certainly WONT want to do the "menial" jobs like cleaning etc in this country if they ever want to buy a home.

Yep, I've mentioned these concerns earlier in either this or the last thread. We have 3 kids and I have been feeling an increasing burden that we will need to support their future housing needs.

cheers

 

[nth brisbanite]

I know the banks have apparently tightened their lending

The banks have certainly tightened their lending to developers but for salary and wage earners it's still pretty easy getting loans. Their criteria is a little tighter but still not that bad.

 

[kincella]

My Modest 10% pa Growth Projections Over a 5 year Plan..
this post will give you an insight into the mind of a property investor....it will give similar results for home owners who intend to stay put while raising a family

lets look at how the figures stack up, growing at 10% pa over 5 years, for either a single house or a portfolio

a 300 k house, becomes 480k's = +180k
a 500k same deal becomes 800k = + 300k
1 million becomes 1,600,000 = + 600k
2 million becomes 3 million = + 1,000,000

now do you get the idea, just how easy it can be done...

can you see why some of us are not the least bit worried about an annual rental income, in the early years after purchase.....its the bigger fish we are catching.....
can you see how the mortgage becomes ...well immaterial after a couple of years.....
can you guess, or estimate the growth of the rental income
after just 2-3 years
now can you understand why some of us are very reluctant to ever sell....

most of us have a plan to sell at least one out of five or more in the portfolio.....and wipe out the debt, or take a big slice off the debt against the other properties...:

its a nice little cash cow....all that extra equity enables one to buy more cash cows, without putting in more cash, or hands in the pocket....
or they may take some of the equity and place it into other avenues for growth...

*** same parents can afford to help the kids purchase an affordable property, out in the burbs, which they can afford.....
same parents may end up selling up and heading for the cheaper home, in the tree or sea change locations.....
and just because as a child you grew up in a suburb, does not mean you need to live in same for the rest of your life.....you can move around

no wonder some of us prefer property as the main investment vehicle...
some can use this as a guide to where house prices will be in 5 years time....

ps dont tell me how unaffordable it will be for the kids, property at least keeps pace with inflation , well actually about 2% above....
and I don't notice everyone complaining about the price of food, petrol, electricity, health care and everything else considered a necessity in life, I guess they are happy with those weekly costs.....

I hope you all have a cool and prosperous 2010....
cheers
.............................................................................................

The owner of McDonalds once asked Harvard students if anyone knew how he made his money.
They answered easy, making hamburgers.
No he replied. I own the best real estate in every capital city in the world>*** The best way to become a millionaire is to borrow a million dollars and have your renters pay it off.
Jack Miller

 

[Dowdy]

My Modest 10% pa Growth Projections Over a 5 year Plan..
this post will give you an insight into the mind of a property investor....it will give similar results for home owners who intend to stay put while raising a family

lets look at how the figures stack up, growing at 10% pa over 5 years, for either a single house or a portfolio

a 300 k house, becomes 480k's = +180k
a 500k same deal becomes 800k = + 300k
1 million becomes 1,600,000 = + 600k
2 million becomes 3 million = + 1,000,000

now do you get the idea, just how easy it can be done...

can you see why some of us are not the least bit worried about an annual rental income, in the early years after purchase.....its the bigger fish we are catching.....
can you see how the mortgage becomes ...well immaterial after a couple of years.....
can you guess, or estimate the growth of the rental income
after just 2-3 years
now can you understand why some of us are very reluctant to ever sell....

most of us have a plan to sell at least one out of five or more in the portfolio.....and wipe out the debt, or take a big slice off the debt against the other properties...:

its a nice little cash cow....all that extra equity enables one to buy more cash cows, without putting in more cash, or hands in the pocket....
or they may take some of the equity and place it into other avenues for growth...

*** same parents can afford to help the kids purchase an affordable property, out in the burbs, which they can afford.....
same parents may end up selling up and heading for the cheaper home, in the tree or sea change locations.....
and just because as a child you grew up in a suburb, does not mean you need to live in same for the rest of your life.....you can move around

no wonder some of us prefer property as the main investment vehicle...
some can use this as a guide to where house prices will be in 5 years time....

ps dont tell me how unaffordable it will be for the kids, property at least keeps pace with inflation , well actually about 2% above....
and I don't notice everyone complaining about the price of food, petrol, electricity, health care and everything else considered a necessity in life, I guess they are happy with those weekly costs.....

I hope you all have a cool and prosperous 2010....
cheers
.............................................................................................

One thing i wanted to ask you, since you're a property investor.

Have you or any any investor you know actually sat down and worked out what your REAL return is every year?

And what i mean by that is - Property growth of the suburb minus interest repayments/ rate minus water/council/power rates?

I didn't include general maintenance since those numbers are harder to get but things like the interest rate and council/water/power rates are easy to keep track of.

So have you or any investor every done it. I would like to think they do since 10%pa turns out to be only 3%pa when you include those costs.

To me it would be like running a business without including your overheads in your profit margin.

I don't notice everyone complaining about the price of food, petrol, electricity, health care and everything else considered a necessity in life, I guess they are happy with those weekly costs.....

On another note.... You must no go out often if you think no one complains about that.

 

[kincella]

you are getting mixed up.... between income less expenses.....versus capital growth..and capital profits
of course we know what our costs are....we need to account for it in our tax returns every year....and if the costs exceed the income, we receive a refund back from the govt....
its not an airy fairy game....where one would not know what the expenses are...its a deadly serious game...
plus we claim building allowance and depreciation expenses,,,,which are book entries, they are non cash...so it increases our expense claims...therefore increasing our tax refund
people who have lower mortgage costs or zilch interest expenses are usually cash flow positive
some of my props run about break even for the year...before the allowance and depreciation claims...so all expenses are covered....it costs me nothing to hold on an annual basis...
the capital growth gains are not subject to tax until the property is sold, and then only half the profit is taxable...assuming held for more than a year

so the expenses are offset against the income each year....
the 10% capital growth I am referring to is all profit
your 3% costs are offset against the rental income
with the commercial property, the tenant pays all outgoings ...expenses...
but not the interest expense if there is a loan