The future of Australian property prices

FxTrader said:

As usual here, you refuse to address the tough questions and instead point to the past as if it will always apply to the future. Keep buying into the bubble bots, it's a sure thing.

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No I have come to realise that our dear botty is just having a joke. And on the direction of property, it goes wherever the meadiaandrealestatebackersofbotssayitgoes. Dear o dear, need to be a confe$$or to set out those big words.

He took my advice I think a few months back and started buying 1966 50 cent silver coins at Davis's just next to his tream stop in Swanston Strert, and I think you are up a good 20% there bots, great stuff.

lolliepops and roses

indeck said:

http://www.finnewsnetwork.com.au/Display.aspx?Site=FNN02

First time I can recall hearing someone from RP data acknowledging prices will likely decline or stay stagnant for over a year.

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Rubbish - RP-Data forecast (and reported) the market slowdown/price declines in 2008, and they picked the trend and reported on it before ABS, Residex, APM etc.

Let's not re-write history please!

FxTrader said:

As for Demographia and Debtdeflation, why not enlighten everyone here as to how their extensive analysis is flawed.

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This has been done to death many times in this and the other ASF property threads. See here for a pretty comprehensive debunking by Christopher Joye of Rismark/RP-Data: http://www.businessspectator.com.au...Dogma-$pd20090129-NQTPP?OpenDocument&src=srch


Cheers,

Beej

tech/a said:

How did they pass serviceability?????? ---Dont believe you!.

22Yr olds speaking like seasoned veterans
Wet behind the ears and no hope of drying off!

Time to bugger off.

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Good point tech/a ......... as I relax in my villa in Bali. Been here for 2 weeks ... just another 2 weeks to go. I enjoy my holidays very much thank you !!

TabJockey said:

This may be a scary thought, but there is no universal law that states that land in and around a major city has to be affordable to the average person. There is a mania with home ownership in Australia and the USA that borders on irrational.

It is blindly encouraged in government policy and social society. Im not saying this encouragement is wrong, it has definately been proven right in Australia over the last 20 years, but you would be foolish to believe that it will always be this way.

People believe that you should be able to afford your own home if you work hard enough, which can be a great goal to have but is not the be all and end all of financial security its often made out to be.

What it is, is an easy to understand all encompassing passive investment strategy for the average family. Subsidised by the government and encouraged by your peers.

Buy your house, forget about dealing with a land lord, pay your mortgage and one day you will collect a massive sum of money on which you will pay 0% tax.

Sounds like an excellent plan, but something about the whole situation makes me feel uneasy.

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I personally think it is a great dream to have to want to own your own home at an affordable price - not as a future investment, but as a place to live in to call your own. I think that housing here should be far more affordable than it is.

One of the reasons housing is so expensive in Australia compared to other countries is to do with various policies of this government. In my opinion the FHB grant was not about helping first home buyers but was intended to prop up housing prices in the GFC. When the GFC hit the government was terrified of house prices declining. This would have adversely affected the banks because of their high exposure to mortgages and after lobbying by the banks the Government opened up our housing market to foreign buyers. A year later the Government reversed some of the changes it had made to foreign ownership but some still remain, such as foreign students being now able to buy property up to unlimited value (whereas previously it could be no more than $300,000) and now 100% of new apartment blocks can be sold to foreigners (previously it was 50%). Why on earth has the government not changed this back to 50%. The property developers must be rubbing their hands together with glee. All this is doing is pushing up our prices, making them more unaffordable to Australians. As you drive into Sydney now along South Dowling Street near Moore Park there are about 7 large apartment blocks about to be built.

If we have such a shortage of dwellings in Australia, which the property spruikers are always telling us is the case, what is the point of building new places which aren’t even being sold to Australians?

There seems to be one huge FOR SALE sign on this country, which is very bad for our standard of living and future prosperity.

Probably also negative gearing adds to housing price pressure and high rents as well. I have read that the argument was also used in other countries that if you got rid of negative gearing housing prices and rents would increase but when the UK and US got rid of the policy in those countries this did not happen. I think that the Government may find it too difficult to do anything about negative gearing now, but it will be forced to do something at some stage in the future.

Beej said:

See here for a pretty comprehensive debunking by Christopher Joye of Rismark/RP-Data: http://www.businessspectator.com.au...Dogma-$pd20090129-NQTPP?OpenDocument&src=srch

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Thanks for the article reference. The Joye article was written in Jan09 and presumably refers to the 2008 Demographia survey so it's only partly relevant to the 2010 report. Rather than a "comprehensive debunking" of Demographia's stats and analysis, Joye primarily takes aim at the house price-to-income ratio stats as being an insufficient predictor of house prices and instead prefers RBA and World Bank analysis dating back to 2007 (pre GFC) and 2008 respectively. After reading the Joye article, one could be excused for believing that the median house price divided by gross annual median household income ratio could be 50 without concern. This measure of affordability is a relative one, draw whatever conclusions you like.

Indeed, the RBA does not believe there is a house price bubble but then given the big 4 banks huge exposure to the property market, the RBA must be very cautions that their statements don't destabilize the market. It’s much easier to jack up rates under the guise of inflation targeting when curbing speculation is also an objective.

The attempt by Joye to shoot the messenger at the start aside, questioning the methodology is fair enough. While Joye accurately outlines other factors that influence house prices, what he’s missing with respect to future price growth is the elephant in the room – household debt levels.

While I find Demographia’s analysis interesting, I prefer Steve Keen’s analysis on Debtdeflation. Perhaps you know of a source that “debunks” his analysis as well.

Just to throw a potentially different element into the mix Where does climate change fit into all this?.

I just finished an excellent book called Eaarth by Bill Mckibben http://www.billmckibben.com/eaarth/eaarthbook.html, by the end I was totally convinced that at least within the next 30 yrs a lot of things in our society and the way we live needs to be repriced. I cannot fathom how something that is such a sink hole for peoples productive capacity like big mortgages on small houses can survive, when to get ourselves out of this mess every dollar will need to pull its weight.

To me guessing which way things will move over then next 5 years is a bit silly, the speculators have made their money in my opinion. If we look at a longer horizon climate change ramifications will definately have an impact. Prices for houses now are predicated on their being as much if not more money flowing around in the future. Unless we ignore climate change and trash the earth and make it unliveable in 100 years fixing the problem will seriously diminish how much money and value people place on houses.

That book completely opened my eyes, I challenge anyone even the venerable Robots to read that book and come back and still be positive about the economics of the world let alone prices for places the sleep at night.

FxTrader said:

Thanks for the article reference.

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No worries - I agree that there are many ways to view this, but I do think the Demographia's methodology is quite flawed - the fact that in the 2008 report at least the Sunshine Coast was the most "un-affordable" area of Australia shows that something was pretty wrong don't you think??

While I find Demographia’s analysis interesting, I prefer Steve Keen’s analysis on Debtdeflation. Perhaps you know of a source that “debunks” his analysis as well.

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Again if you do a search of the forum archives (I presume we still can?) you will find loads of discussion (some debunking!) about Ass. Prof. Steve Keen and his arguments. The main thing I note is how fundamentally wrong his widely media-spruiked views on the Aussie economy and house prices in particular have been for years. So wrong even that he had to walk from Canberra to Mt Kosciusko earlier this year wearing a T-shirt labeled "I was hopelessly wrong house prices, ask me how?", after loosing a bet in 2008 with Rory Robertson of Macquarie Bank. He predicted a crash of 40% in Oz house prices over a "few" years in 2008, instead after a drop of no more than 5% at the height of the GFC, they then rebounded over 20% and surpassed their previous peak! He still does not acknowledge the real reasons why he was so wrong, instead blaming the government stimulus via the FHBG boost etc, of course forgetting to mention that he made all his predictions, and his bet, after those policies had been announced! Also pretty naive to omit government involvement/intervention in the economy.

So I listen to what that guy has to say with a huge grain of salt. I usually find debt focussed analysis ignores/omits other important factors, like national savings rates and superannuation savings, consumer confidence, government intervention, interest rate trends etc.

Cheers,

Beej

Beej said:

I agree that there are many ways to view this, but I do think the Demographia's methodology is quite flawed - the fact that in the 2008 report at least the Sunshine Coast was the most "un-affordable" area of Australia shows that something was pretty wrong don't you think??

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After reading the latest Demograhia affordability survey, there is definitely a bias toward more liberal, less restrictive land regulation as a means to reduce land prices. On balance, I think much of the analysis in the latest report has merit and I would not dismiss it all on the basis that I disagree with how they calculate a metric or how accurately this metric predicts bubbles.

So I listen to what that guy has to say with a huge grain of salt. I usually find debt focussed analysis ignores/omits other important factors, like national savings rates and superannuation savings, consumer confidence, government intervention, interest rate trends etc.

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Producing evidence for something and prediction are quite different things. Making a bet that something like a property bust will happen within a certain time frame is a gamblers game - silly. It's a bit like a volcanologist trying to predict an eruption will happen in a given month, all the evidence may indicate this but such precision is just not possible. I don't ignore Keen's analysis and stats because he has failed to accurately predict the date of a property crash.

To me the weight of evidence suggests that the spike in property prices over the last two years is unsustainable and some kind of correction is due. While I don't think a 40% correction is plausible, at least 10-20% seems reasonable in some markets. I'm holding for now but am watching the property market closer than ever before as spikes in charts always make me cautious.

FXTrader - sure, I don't see anything unreasonable with what you have just written. Although as for Keen I do think he brought all his credibility problems on himself with the way he went about things a few years ago.

Cheers,

Beej

hello,

yeah, he just took the wrong turn

oh well, anyone seen the crash yet? gotta happen, happened in US, UK, Spain, Ireland like we just the same as those joints

thankyou
professor robots

robots said:

oh well, anyone seen the crash yet? gotta happen, happened in US, UK, Spain, Ireland like we just the same as those joints

thankyou
professor robots

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Hey Robbie...ive recently joined a living in Panama type forum and apparently the crash hasn't happened there yet either, some posters there suggesting that it could be the laundered drug money propping it all up...ive no idea. :dunno:

Are we really just like Panama?

Look at China - shows Australia is so backward, when it comes to housing and infrastructure
I wish the Chinese could come over to OZ and show our stupid politicians...just how to build cities and associated infrastructure...all within a very short time frame, and make it happen...
instead we get committees to have a look, or a study done which take years, then they finally decide we cannot afford it....
China today, makes Australia look like not a 3rd world country, but one so out of touch with reality, we may as well be living in the 18th century....compared to the standards China has imposed.
Plus China has the added benefit, all those former unemployed poverty stricken people, are now gainfully employed, and apart from paying some taxes, also pay their own way....
I see it as a win win situation, not only for the people, but for the government to boot.

now do yourselves a favour and get hold of this book, written by a former editor and translator of contemporary Chinese literature , before joining the BBC world service, later a correspondent in China.....Getting Rich First by Duncan Hewitt....published by Vintage Books....he lived in China from 1986 until 2002.....and watched with amazement at the total transformation.....of China..............
ps you can get if from ....dirt Cheap Books at about $5.00
an absolutley brilliant read.....think most people would be rather angry, at just how backward and slow Australia is compared to China.....but the US and other countries are even worse than OZ
cheers

kincella said:

Look at China - shows Australia is so backward, when it comes to housing and infrastructure
I wish the Chinese could come over to OZ and show our stupid politicians...just how to build cities and associated infrastructure...all within a very short time frame, and make it happen...
instead we get committees to have a look, or a study done which take years, then they finally decide we cannot afford it....
China today, makes Australia look like not a 3rd world country, but one so out of touch with reality, we may as well be living in the 18th century....compared to the standards China has imposed.
Plus China has the added benefit, all those former unemployed poverty stricken people, are now gainfully employed, and apart from paying some taxes, also pay their own way....
I see it as a win win situation, not only for the people, but for the government to boot.

now do yourselves a favour and get hold of this book, written by a former editor and translator of contemporary Chinese literature , before joining the BBC world service, later a correspondent in China.....Getting Rich First by Duncan Hewitt....published by Vintage Books....he lived in China from 1986 until 2002.....and watched with amazement at the total transformation.....of China..............
ps you can get if from ....dirt Cheap Books at about $5.00
an absolutley brilliant read.....think most people would be rather angry, at just how backward and slow Australia is compared to China.....but the US and other countries are even worse than OZ
cheers

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Yep, good read, except people in australia and the US wont work for 14 hours a day on a bowl of rice.

Do your self a bit of a favour there Kincella, and think

The Egyptians, Greeks and Romans all did it with lots of people working for nothing but a feed and a place to sleep.

kincella said:

Look at China - shows Australia is so backward, when it comes to housing and infrastructure
I wish the Chinese could come over to OZ and show our stupid politicians...just how to build cities and associated infrastructure...all within a very short time frame, and make it happen...
instead we get committees to have a look, or a study done which take years, then they finally decide we cannot afford it....
China today, makes Australia look like not a 3rd world country, but one so out of touch with reality, we may as well be living in the 18th century....compared to the standards China has imposed.
Plus China has the added benefit, all those former unemployed poverty stricken people, are now gainfully employed, and apart from paying some taxes, also pay their own way....
I see it as a win win situation, not only for the people, but for the government to boot.

now do yourselves a favour and get hold of this book, written by a former editor and translator of contemporary Chinese literature , before joining the BBC world service, later a correspondent in China.....Getting Rich First by Duncan Hewitt....published by Vintage Books....he lived in China from 1986 until 2002.....and watched with amazement at the total transformation.....of China..............
ps you can get if from ....dirt Cheap Books at about $5.00
an absolutley brilliant read.....think most people would be rather angry, at just how backward and slow Australia is compared to China.....but the US and other countries are even worse than OZ
cheers

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Australia has been around for around 300 years. China, in some form or other, has been around for 4000 years. Australia has 20-30 million people. China has >1 billion.

I'd say in terms of development, we are doing pretty good.

kincella, you mean to build a building like this???

13-story apartment building collapsed in Shanghai
Reported China Journal: In the weekend’s bizarrest news, a nearly finished, newly constructed building in Shanghai toppled over, killing one worker. As can be seen in the photo below, the 13-story apartment building collapsed with just enough room to escape what would have been a far more destructive domino effect involving other structures in the 11-building complex. See original photos here.
http://andypeach.com/2009/06/13-story-apartment-building-collapsed-in-shanghai-original-photos.html

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Foundations? LOL I'm no builder but I would of thought there would be a lot more foundation under a 13 story building? Maybe tech/a can give some insight?

you posters are so funny....so they have dodgy bros working in China...and none in Aus...wow....
and the other comment about how long the chinese have been around....sure when they were all living in caves, and it took months to travel to another cave to let others know how things worked....or compared ideas and news

how does that compare to todays environment....where news is instantly flashed around the world...
oh, thats right, our BB is so slow ......it may take a minute or more....

the chinese have a fast train, about 460 k's ph, took them about 2 years to build...
our oz govnuts spent 10 years mulling the idea, wasted about 2 billion on the report, then eddington said it would cost 8 billion for Vics new fast bullet train....but bracksy and brumby said no....so here we are, still travel to the nsw border on trains built in 1960, takes over 4 hours, when they are running....they have not been running since about 2007, they use buses instead....built new tracks that are dodgy.....
I know who the dodgy ones are in OZ....its the pollies and their mate advisors
they must all share the one tiny pea sized brain...then pass it around for the next moron to use
thats so why this forum is what it is.........

kincella said:

the chinese have a fast train, about 460 k's ph, took them about 2 years to build...
our oz govnuts spent 10 years mulling the idea, wasted about 2 billion on the report,

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In Victoria we spent around $2 billion just on a ticket system for public transport.

I got the fast train in China last year from Shanghai to Hangzhou, its quite a amazing experiance Australia is far behind China/Europe and most of Asia in the sense of transport.

kincella said:

you posters are so funny....

its the pollies and their mate advisors
they must all share the one tiny pea sized brain...then pass it around for the next moron to use
thats so why this forum is what it is.........

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LOL

But yet you continue to post here ......

Funny place the internet

This thread has the highest percentage of crackpots out of all the threads I post in.

I used to think the Gold Price thread was bad (GOLD 10,000!?) but thats tame these days compared to some of the stuff that gets sprouted here.